Over the past six months, First Bancorp has been a great trade, beating the S&P 500 by 7.2%. Its stock price has climbed to $61.79, representing a healthy 15.6% increase. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy First Bancorp, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is First Bancorp Not Exciting?
Despite the momentum, we don’t have much confidence in First Bancorp. Here are three reasons you should be careful with FBNC, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income.
Unfortunately, First Bancorp’s 8.2% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the banking sector.
2. Projected Net Interest Income Growth Is Slim
Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect First Bancorp’s net interest income to rise by 4.4%, a deceleration versus its 9.9% annualized growth for the past two years. This projection is below its 9.9% annualized growth rate for the past two years.
3. EPS Barely Growing
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.
First Bancorp’s unimpressive 6.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
First Bancorp’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 1.6× forward P/B (or $61.79 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We’re fairly confident there are better investments elsewhere. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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