First Bancorp has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 11.3% to $64.01 per share while the index has gained 8.2%.
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Why Is First Bancorp Not Exciting?
We don’t have much confidence in First Bancorp. Here are three reasons why there are better opportunities than FBNC, plus one stock we’d rather own.
1. Long-Term Revenue Growth Disappoints
Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income.
Regrettably, First Bancorp’s revenue grew at a mediocre 8.2% compounded annual growth rate over the last five years. This was below our standard for the banking sector.
2. Projected Net Interest Income Growth Is Slim
Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect First Bancorp’s net interest income to rise by 4.3%, a deceleration versus its 9.9% annualized growth for the past two years. This projection is below its 9.9% annualized growth rate for the past two years.
3. 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 Bancorp’s unimpressive 6.5% 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.
Final Judgment
First Bancorp isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 1.6× forward P/B (or $64.01 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We’re fairly confident there are better investments elsewhere. We’d suggest looking at the Amazon and PayPal of Latin America.
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