Over the last six months, Home Bancshares’s shares have sunk to $27.16, producing a disappointing 7% loss - a stark contrast to the S&P 500’s 16.3% gain. This may have investors wondering how to approach the situation.
Following the drawdown, is now an opportune time to buy HOMB? Find out in our full research report, it’s free for active Edge members.
Why Does Home Bancshares Spark Debate?
Founded in Conway, Arkansas in 1998 and growing through strategic acquisitions across the Southeast, Home Bancshares (NYSE:HOMB) operates as the bank holding company for Centennial Bank, providing commercial and retail banking services to businesses and individuals across multiple states.
Two Things to Like:
1. Skyrocketing Revenue Shows Strong Momentum
Net interest income and and fee-based revenue are the two pillars supporting bank earnings. The former captures profit from the gap between lending rates and deposit costs, while the latter encompasses charges for banking services, credit products, wealth management, and trading activities.
Luckily, Home Bancshares’s revenue grew at an impressive 9.4% compounded annual growth rate over the last five years. Its growth beat the average banking company and shows its offerings resonate with customers.
2. EPS Moving Up Steadily
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Home Bancshares’s EPS grew at a decent 5.8% compounded annual growth rate over the last five years. This performance was better than most banking businesses.
One Reason to be Careful:
Projected Net Interest Income Growth Is Slim
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 Home Bancshares’s net interest income to rise by 3.5%, close to its 2.2% annualized growth for the past two years.
Final Judgment
Home Bancshares’s positive characteristics outweigh the negatives. With the recent decline, the stock trades at 1.3× forward P/B (or $27.16 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free for active Edge members.
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