City Holding trades at $127.61 and has moved in lockstep with the market. Its shares have returned 6.8% over the last six months while the S&P 500 has gained 5.4%.
Is now the time to buy CHCO? Find out in our full research report, it’s free.
Why Does City Holding Spark Debate?
With roots dating back to 1957 and a strategic presence along the I-64 and I-81 corridors, City Holding (NASDAQGS:CHCO) operates as a financial holding company providing banking, trust, and investment services through its subsidiary City National Bank across West Virginia, Kentucky, Virginia, and Ohio.
Two Positive Attributes:
1. Net Interest Income Drives Additional Growth Opportunities
While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.
City Holding’s net interest income has grown at a 9.9% annualized rate over the last four years, a step above the broader bank 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. Outstanding Long-Term EPS Growth
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.
City Holding’s EPS grew at an astounding 10.3% compounded annual growth rate over the last five years, higher than its 3.6% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
Net interest income and 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.
Over the last five years, City Holding grew its revenue at a mediocre 3.6% compounded annual growth rate. This wasn’t a great result compared to the rest of the bank sector, but there are still things to like about City Holding. 
Final Judgment
City Holding’s positive characteristics outweigh the negatives, but at $127.61 per share (or 2.3× forward P/B), is now the right time to buy the stock? See for yourself in our full research report, it’s free.
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