Renasant has had an impressive run over the past six months as its shares have beaten the S&P 500 by 13%. The stock now trades at $42.99, marking a 21% gain. This run-up might have investors contemplating their next move.
Is now the time to buy Renasant, 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 Is Renasant Not Exciting?
Despite the momentum, we’re sitting this one out for now. Here are three reasons we avoid RNST, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Net interest income 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.
Unfortunately, Renasant’s 9.4% annualized revenue growth over the last five years was mediocre. 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.
Renasant’s EPS grew at a weak 5% compounded annual growth rate over the last five years, lower than its 9.4% 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.
Disappointingly for investors, Renasant’s TBVPS grew at a sluggish 3.5% annual clip over the last two years.
Final Judgment
Renasant’s business quality ultimately falls short of our standards. With its shares beating the market recently, the stock trades at 1× forward P/B (or $42.99 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. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.
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