What a brutal six months it’s been for Coastal Financial. The stock has dropped 33.7% and now trades at $75.35, rattling many shareholders. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Following the drawdown, is this a buying opportunity for CCB? Find out in our full research report, it’s free.
Why Is Coastal Financial a Good Business?
Pioneering the intersection of traditional banking and financial technology in the Pacific Northwest, Coastal Financial (NASDAQ: CCB) operates as a bank holding company that provides traditional banking services and Banking-as-a-Service (BaaS) solutions to consumers and businesses.
1. Net Interest Income Skyrockets, Fueling Growth Opportunities
Our experience and research show the market cares primarily about a bank’s net interest income growth as one-time fees are considered a lower-quality and non-recurring revenue source.
Coastal Financial’s net interest income has grown at a 40.1% annualized rate over the last five years, much better than the broader banking industry. Its growth was driven by an increase in its net interest margin, which represents how much a bank earns in relation to its outstanding loans, as its loan book shrank throughout that period.
2. Elite Net Interest Margin Powers Best-In-Class Loan Book
Net interest margin (NIM) serves as a critical gauge of a bank's fundamental profitability by showing the spread between interest income and interest expenses. It's essential for understanding whether a firm can sustainably generate returns from its lending operations.
Over the past two years, we can see that Coastal Financial’s net interest margin averaged an elite 7.1%, indicating the company has a high-yielding loan book and a low cost of funds.
3. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Coastal Financial’s EPS grew at an astounding 19.6% compounded annual growth rate over the last five years. This performance was better than most banking businesses.
Final Judgment
These are just a few reasons why we're bullish on Coastal Financial. With the recent decline, the stock trades at 2.1× forward P/B (or $75.35 per share). Is now the right time to buy? See for yourself in our full research report, it’s free.
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