Shareholders of Columbia Banking System would probably like to forget the past six months even happened. The stock dropped 21.1% and now trades at $22.59. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Columbia Banking System, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Columbia Banking System Not Exciting?
Despite the more favorable entry price, we're swiping left on Columbia Banking System for now. Here are three reasons why there are better opportunities than COLB and a stock we'd rather own.
1. 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 Columbia Banking System’s net interest income to rise by 2.3%, a deceleration versus its 18.9% annualized growth for the past two years. This projection is below its 18.9% annualized growth rate for the past two years.
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Columbia Banking System’s EPS grew at an unimpressive 2.9% compounded annual growth rate over the last five years, lower than its 17.5% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. 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, Columbia Banking System’s TBVPS grew at a mediocre 8.7% annual clip over the last two years.
Final Judgment
Columbia Banking System isn’t a terrible business, but it doesn’t pass our quality test. After the recent drawdown, the stock trades at 0.9× forward P/B (or $22.59 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of Columbia Banking System
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