Cathay General Bancorp has had an impressive run over the past six months as its shares have beaten the S&P 500 by 13.2%. The stock now trades at $62.59, marking a 24.9% gain. This run-up might have investors contemplating their next move.

Is now the time to buy Cathay General Bancorp, 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 Cathay General Bancorp Not Exciting?

We’re glad investors have benefited from the price increase, but we’re passing on Cathay General Bancorp for now. Here are three reasons we avoid CATY, plus one stock we’d rather own.

1. Net Interest Income Points to Soft Demand

While banks 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.

Cathay General Bancorp’s net interest income has grown at a 6.6% annualized rate over the last five years, worse than the broader banking industry and in line with its total revenue.

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.

Cathay General Bancorp’s unimpressive 8% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.

3. Projected TBVPS Growth Is Slim

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 Cathay General Bancorp’s TBVPS to grow by 10% to $43.94, a mediocre growth rate.

Final Judgment

Cathay General Bancorp isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 1.3× forward P/B (or $62.59 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 suggest looking at the most entrenched endpoint security platform on the market.

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