Since January 2025, Stellar Bancorp has been in a holding pattern, posting a small return of 4.4% while floating around $29.28.
Is there a buying opportunity in Stellar Bancorp, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Stellar Bancorp Not Exciting?
We're cautious about Stellar Bancorp. Here are three reasons why STEL doesn't excite us and a stock we'd rather own.
1. Projected Net Interest Income Growth Shows Limited Upside
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 Stellar Bancorp’s net interest income to rise by 2.3%, a deceleration versus its 7.6% annualized growth for the past two years. This projection is below its 7.6% annualized growth rate for the past two years.
2. EPS Trending Down
We track the change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Stellar Bancorp’s full-year EPS dropped 30.1%, or 14.1% annually, over the last two years. We tend to steer our readers away from companies with falling revenue and EPS, where diminishing earnings could imply changing secular trends and preferences. If the tide turns unexpectedly, Stellar Bancorp’s low margin of safety could leave its stock price susceptible to large downswings.
3. Steady Increase in TBVPS Highlights Solid Asset Growth
For banks, tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.
Although Stellar Bancorp’s TBVPS declined at a 2.8% annual clip over the last five years. the good news is that its growth inflected positive over the past two years as TBVPS grew at a solid 13.7% annual clip (from $15.24 to $19.69 per share).
Final Judgment
Stellar Bancorp isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 0.9× forward P/B (or $29.28 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. We’d recommend looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
Stocks We Like More Than Stellar Bancorp
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