Origin Bancorp has had an impressive run over the past six months as its shares have beaten the S&P 500 by 19.9%. The stock now trades at $54.48, marking a 33.4% gain. This was partly thanks to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in Origin Bancorp, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.
Why Is Origin Bancorp Not Exciting?
Despite the momentum, we’re passing on Origin Bancorp for now. Here are three reasons you should be careful with OBK, plus one 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, Origin Bancorp’s revenue grew at a mediocre 8.7% compounded annual growth rate over the last five years. This was below our standard for the banking sector.
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Origin Bancorp’s EPS grew at a weak 1.5% compounded annual growth rate over the last five years, lower than its 8.7% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. Projected TBVPS Growth Is Slim
Tangible book value per share (TBVPS) growth is driven by a bank’s ability to earn more than its cost of capital through lending activities while maintaining a strong balance sheet.
Consensus estimates call for Origin Bancorp’s TBVPS to grow by 8.7% to $39.52, which is a paltry growth rate.
Final Judgment
Origin Bancorp isn’t a terrible business, but it doesn’t pass our quality test. With its shares topping the market in recent months, the stock trades at 1.3× forward P/B (or $54.48 per share). While this valuation is fair, the upside isn’t great compared to the potential downside. We’re fairly confident there are better investments elsewhere. We’d recommend looking at one of our top software and edge computing picks.
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