Over the last six months, Pacific Premier Bancorp’s shares have sunk to $22.53, producing a disappointing 9.1% loss - a stark contrast to the S&P 500’s 4.7% gain. This might have investors contemplating their next move.
Is now the time to buy Pacific Premier Bancorp, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Do We Think Pacific Premier Bancorp Will Underperform?
Even with the cheaper entry price, we're sitting this one out for now. Here are three reasons why PPBI doesn't excite us and a stock we'd rather own.
1. Declining Net Interest Income Reflects Weakness
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.
Pacific Premier Bancorp’s net interest income has declined by 4.8% annually over the last four years, much worse than the broader banking industry. This was driven by a decrease in its net interest margin, which represents how much a bank earns in relation to its outstanding loans, as its loan book increased throughout that period.
3. EPS Trending Down
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.
Sadly for Pacific Premier Bancorp, its EPS declined by 9.1% annually over the last five years while its revenue grew by 4.4%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Pacific Premier Bancorp doesn’t pass our quality test. Following the recent decline, the stock trades at 0.8× forward P/B (or $22.53 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. We’d recommend looking at a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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