Northwest Bancshares’s 19% return over the past six months has outpaced the S&P 500 by 8.5%, and its stock price has climbed to $15.38 per share. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is there a buying opportunity in Northwest Bancshares, or does it present a risk to your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is Northwest Bancshares Not Exciting?

Despite the momentum, we don’t have much confidence in Northwest Bancshares. Here are three reasons why NWBI doesn’t excite us, plus one stock we’d rather own.

1. Net Interest Income Points to Soft Demand

Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.

Northwest Bancshares’s net interest income has grown at a 7.1% annualized rate over the last five years, worse than the broader banking industry. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.

2. 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.

Northwest Bancshares’s EPS grew at a weak 2.8% compounded annual growth rate over the last five years, lower than its 5.5% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

3. Substandard TBVPS Growth Indicates Limited Asset Expansion

For banks, tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.

To the detriment of investors, Northwest Bancshares’s TBVPS grew at a sluggish 3.6% annual clip over the last two years.

Final Judgment

Northwest Bancshares isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 1.1× forward P/B (or $15.38 per share). While this valuation is reasonable, 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 a fast-growing restaurant franchise with an A+ ranch dressing sauce.

Stocks We Would Buy Instead of Northwest Bancshares

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