Zions Bancorporation’s 18.3% return over the past six months has outpaced the S&P 500 by 7%, and its stock price has climbed to $61.68 per share. This performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Zions Bancorporation, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.
Why Is Zions Bancorporation Not Exciting?
We’re glad investors have benefited from the price increase, but we're sitting this one out for now. Here are three reasons you should be careful with ZION and a stock we'd rather own.
1. 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.
Zions Bancorporation’s net interest income has grown at a 3.8% annualized rate over the last five years, much worse than the broader banking industry and in line with its total revenue.
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.
Zions Bancorporation’s weak 5.3% 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.
3. Growing TBVPS Reflects Strong Asset Base
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.
Although Zions Bancorporation’s TBVPS increased by a meager 1.5% annually over the last five years, the good news is that its growth has recently accelerated as TBVPS grew at an exceptional 19.3% annual clip over the past two years (from $29.34 to $41.75 per share).
Final Judgment
Zions Bancorporation isn’t a terrible business, but it isn’t one of our picks. With its shares beating the market recently, the stock trades at 1.1× forward P/B (or $61.68 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
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