TowneBank currently trades at $36.11 per share and has shown little upside over the past six months, posting a middling return of 3%. The stock also fell short of the S&P 500’s 8.7% gain during that period.
Is now the time to buy TowneBank, 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 Is TowneBank Not Exciting?
We’re cautious about TowneBank. Here are three reasons we avoid TOWN, plus one 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, investment banking, and trading fees.
Unfortunately, TowneBank’s 5.2% annualized revenue growth over the last five years was sluggish. This fell short of our benchmark for the banking sector.
2. Substandard TBVPS Growth Indicates Limited Asset Expansion
We consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation.
Disappointingly for investors, TowneBank’s TBVPS grew at a sluggish 4% annual clip over the last two years.
Final Judgment
TowneBank isn’t a terrible business, but it doesn’t pass our quality test. With its shares trailing the market in recent months, the stock trades at 1.1× forward P/B (or $36.11 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We’re pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a top digital advertising platform riding the creator economy.
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