S&T Bancorp trades at $40.66 per share and has stayed right on track with the overall market, gaining 9% over the last six months. At the same time, the S&P 500 has returned 13.3%.
Is now the time to buy S&T Bancorp, 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 for active Edge members.
Why Is S&T Bancorp Not Exciting?
We're swiping left on S&T Bancorp for now. Here are three reasons we avoid STBA and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
Our experience and research show the market cares primarily about a bank’s net interest income growth as one-time fees are considered a lower-quality and non-recurring revenue source.
S&T Bancorp’s net interest income has grown at a 4.6% annualized rate over the last five years, much worse than the broader banking industry.
2. Net Interest Margin Dropping
Net interest margin (NIM) represents how much a bank earns in relation to its outstanding loans. It's one of the most important metrics to track because it shows how a bank's loans are performing and whether it has the ability to command higher premiums for its services.
Over the past two years, S&T Bancorp’s net interest margin averaged 3.9%. However, its margin contracted by 33.7 basis points (100 basis points = 1 percentage point) over that period.
This decline was a headwind for its net interest income. While prevailing rates are a major determinant of net interest margin changes over time, the decline could mean S&T Bancorp either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition.
3. EPS Took a Dip Over the Last Two Years
Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.
Sadly for S&T Bancorp, its EPS declined by more than its revenue over the last two years, dropping 4.6%. This tells us the company struggled to adjust to shrinking demand.
Final Judgment
S&T Bancorp’s business quality ultimately falls short of our standards. That said, the stock currently trades at 1× forward P/B (or $40.66 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now. We’d recommend looking at our favorite semiconductor picks and shovels play.
Stocks We Would Buy Instead of S&T Bancorp
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