First Financial Bankshares trades at $34.88 and has moved in lockstep with the market. Its shares have returned 11.3% over the last six months while the S&P 500 has gained 7.7%.

Is there a buying opportunity in First Financial Bankshares, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is First Financial Bankshares Not Exciting?

We’re sitting this one out for now. Here are three reasons you should be careful with FFIN, 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.

Over the last five years, First Financial Bankshares grew its revenue at a sluggish 5.3% compounded annual growth rate. This fell short of our benchmark for the banking sector.

2. Net Interest Income Points to Soft Demand

Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.

First Financial Bankshares’s net interest income has grown at a 7.4% annualized rate over the last five years, worse than the broader banking industry.

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.

First Financial Bankshares’s weak 4.7% 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 Financial Bankshares’s business quality ultimately falls short of our standards. That said, the stock currently trades at 2.4× forward P/B (or $34.88 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward one of our all-time favorite software stocks.

Stocks We Would Buy Instead of First Financial Bankshares

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