CVB Financial trades at $20.46 and has moved in lockstep with the market. Its shares have returned 10.8% over the last six months while the S&P 500 has gained 6.4%.
Is now the time to buy CVB Financial, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think CVB Financial Will Underperform?
We don't have much confidence in CVB Financial. Here are three reasons there are better opportunities than CVBF and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions.
Regrettably, CVB Financial’s revenue grew at a sluggish 2.3% compounded annual growth rate over the last five years. This fell short of our benchmarks.
2. Net Interest Income Points to Soft Demand
While bank 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.
CVB Financial’s net interest income has grown at a 2% annualized rate over the last five years, much worse than the broader banking industry and in line with its total revenue. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.
3. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
CVB Financial’s weak 3% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.
Final Judgment
We cheer for all companies supporting the economy, but in the case of CVB Financial, we’ll be cheering from the sidelines. That said, the stock currently trades at 1.1× forward P/B (or $20.46 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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