Over the past six months, First Bancorp has been a great trade, beating the S&P 500 by 19.5%. Its stock price has climbed to $53.50, representing a healthy 32.6% increase. This performance may have investors wondering how to approach the situation.
Is now the time to buy First Bancorp, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free for active Edge members.
Why Is First Bancorp Not Exciting?
Despite the momentum, we don't have much confidence in First Bancorp. Here are three reasons there are better opportunities than FBNC and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions.
Regrettably, First Bancorp’s revenue grew at a tepid 7.6% compounded annual growth rate over the last five years. This fell short of our benchmark for the banking sector.
3. 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.
First Bancorp’s EPS grew at a weak 4.3% compounded annual growth rate over the last five years, lower than its 7.6% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
First Bancorp isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 1.3× forward P/B (or $53.50 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 fairly confident there are better investments elsewhere. Let us point you toward the Amazon and PayPal of Latin America.
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