National Bank Holdings currently trades at $38.53 per share and has shown little upside over the past six months, posting a small loss of 1.6%.
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Why Do We Think National Bank Holdings Will Underperform?
We're swiping left on National Bank Holdings for now. Here are three reasons why NBHC doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees.
Regrettably, National Bank Holdings’s revenue grew at a sluggish 4.5% compounded annual growth rate over the last five years. This was below our standard for the banking sector.
2. EPS Growth Has Stalled
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
National Bank Holdings’s flat EPS over the last five years was below its 4.5% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. Projected TBVPS Growth Is Slim
A bank’s tangible book value per share (TBVPS) increases when it generates higher net interest margins and keeps credit losses low, allowing it to compound shareholder value over time.
Over the next 12 months, Consensus estimates call for National Bank Holdings’s TBVPS to grow by 3.4% to $28.37, lousy growth rate.
Final Judgment
We cheer for all companies supporting the economy, but in the case of National Bank Holdings, we’ll be cheering from the sidelines. That said, the stock currently trades at 1× forward P/B (or $38.53 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at one of our top software and edge computing picks.
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