First Busey has had an impressive run over the past six months as its shares have beaten the S&P 500 by 7.9%. The stock now trades at $30.55, marking a 21.7% gain. This run-up might have investors contemplating their next move.
Is there a buying opportunity in First Busey, 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 First Busey Not Exciting?
We’re happy investors have made money, but we’re cautious about First Busey. Here are three reasons we avoid BUSE, plus one stock we’d rather own.
1. Low Net Interest Margin Hinders Flexibility
Net interest margin (NIM) represents the unit economics of a bank by measuring the profitability of its interest-bearing assets relative to its interest-bearing liabilities. It’s a fundamental metric that investors use to assess lending premiums and returns.
Over the past two years, we can see that First Busey’s net interest margin averaged a subpar 3.5%, indicating the company has weak loan book economics.
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.
First Busey’s EPS grew at a weak 1.6% compounded annual growth rate over the last five years, lower than its 14.8% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
3. TBVPS Projections Show Stormy Skies Ahead
The key to tangible book value per share (TBVPS) growth is a bank’s ability to earn consistent returns on its assets that exceed its funding costs and credit losses.
Over the next 12 months, Consensus estimates call for First Busey’s TBVPS to shrink by 4.8% to $21.88, a sour projection.
Final Judgment
First Busey 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 1.1× forward P/B (or $30.55 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re fairly confident there are better investments elsewhere. Let us point you toward one of our all-time favorite software stocks.
Stocks We Like More Than First Busey
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