Over the past six months, Banc of California’s shares (currently trading at $17.19) have posted a disappointing 8.3% loss, well below the S&P 500’s 8.9% gain. This was partly due to its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Banc of California, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Do We Think Banc of California Will Underperform?
Even with the cheaper entry price, we’re sitting this one out for now. Here are three reasons we avoid BANC, plus one stock we’d rather own.
1. Net Interest Income Points to Soft Demand
While banks generate revenue from multiple sources, investors view net interest income as a cornerstone — its predictable, recurring characteristics stand in sharp contrast to the volatility of one-time fees.
Banc of California’s net interest income has grown at a 2.5% annualized rate over the last five years, much worse than the broader banking industry.
2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Banc of California, its EPS declined by 24.3% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
Final Judgment
Banc of California falls short of our quality standards. Following the recent decline, the stock trades at 0.9× forward P/B (or $17.19 per share). This valuation multiple is fair, but we don’t have much confidence in the company. There are better investments elsewhere. We’d suggest looking at the most entrenched endpoint security platform on the market.
Stocks We Would Buy Instead of Banc of California
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