Cathay General Bancorp has been treading water for the past six months, recording a small return of 4.4% while holding steady at $49.87. However, the stock is beating the S&P 500’s 5.5% decline during that period.

Is now the time to buy Cathay General Bancorp, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Is Cathay General Bancorp Not Exciting?

Despite the relative momentum, we're swiping left on Cathay General Bancorp for now. Here are three reasons there are better opportunities than CATY and a 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, Cathay General Bancorp’s revenue grew at a tepid 6.4% compounded annual growth rate over the last five years. This fell short of our benchmark for the banking sector.

2. Net Interest Income Points to Soft Demand

Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.

Cathay General Bancorp’s net interest income has grown at a 6.1% annualized rate over the last five years, worse than the broader banking industry and in line with its total revenue.

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.

Cathay General Bancorp’s EPS grew at 9.6% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 6.4% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

Cathay General Bancorp’s business quality ultimately falls short of our standards. Following its recent outperformance amid a softer market environment, the stock trades at 1× forward P/B (or $49.87 per share). This valuation multiple is fair, but we don’t have much faith in the company. We're fairly confident there are better investments elsewhere. We’d recommend looking at a top digital advertising platform riding the creator economy.

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