Home Bancshares currently trades at $29.35 per share and has shown little upside over the past six months, posting a middling return of 3.1%.

Is now the time to buy Home Bancshares, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Home Bancshares Not Exciting?

We're swiping left on Home Bancshares for now. Here are three reasons there are better opportunities than HOMB and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

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.

Regrettably, Home Bancshares’s revenue grew at a mediocre 9.2% compounded annual growth rate over the last five years. This fell short of our benchmark for the banking sector.

2. Net Interest Income Points to Soft Demand

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.

Home Bancshares’s net interest income has grown at a 8.9% annualized rate over the last five years, slightly worse than the broader banking industry and in line with its total revenue.

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.

Home Bancshares’s EPS grew at a weak 6.2% compounded annual growth rate over the last five years, lower than its 9.2% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Home Bancshares isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 1.3× forward P/B (or $29.35 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're pretty confident there are superior stocks to buy right now. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Would Buy Instead of Home Bancshares

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