3 Reasons to Avoid WSFS and 1 Stock to Buy Instead

via StockStory
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WSFS Cover Image

WSFS Financial trades at $76.90 per share and has stayed right on track with the overall market, gaining 20% over the last six months. At the same time, the S&P 500 has returned 18%.

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

Why Is WSFS Financial Not Exciting?

We’re cautious about WSFS Financial. Here are three reasons why WSFS doesn’t excite us, plus one stock we’d rather own.

1. Lackluster Revenue Growth

Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. WSFS Financial’s recent performance shows its demand has slowed as its annualized revenue growth of 4.1% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. WSFS Financial Year-On-Year Revenue GrowthNote: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

2. EPS Barely Growing

Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.

WSFS Financial’s EPS grew at a weak 2.1% compounded annual growth rate over the last five years, lower than its 11.8% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

WSFS Financial Trailing 12-Month EPS (Non-GAAP)

3. Projected TBVPS Growth Is Slim

Tangible book value per share (TBVPS) growth comes from a bank’s ability to profitably lend while maintaining prudent risk management and efficient operations.

Over the next 12 months, Consensus estimates call for WSFS Financial’s TBVPS to grow by 8.8% to $37.34, paltry growth rate.

WSFS Financial Quarterly Tangible Book Value per Share

Final Judgment

WSFS Financial isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 1.4× forward P/B (or $76.90 per share). Investors with a higher risk tolerance might like the company, but we don’t really see a big opportunity at the moment. We’re pretty confident there are superior stocks to buy right now. We’d recommend looking at the Amazon and PayPal of Latin America.

Stocks We Like More Than WSFS Financial

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