Over the past six months, The Bancorp’s shares (currently trading at $54.19) have posted a disappointing 9.2% loss, well below the S&P 500’s 13.3% gain. This was partly driven by its softer quarterly results and might have investors contemplating their next move.
Following the drawdown, is now a good time to buy TBBK? Find out in our full research report, it’s free.
Why Is TBBK a Good Business?
Operating behind the scenes of many popular fintech apps and prepaid cards you might use daily, The Bancorp (NASDAQ: TBBK) is a bank holding company that specializes in providing banking services to fintech companies and offering specialty lending products.
1. Net Interest Income Drives Additional Growth Opportunities
Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.
The Bancorp’s net interest income has grown at a 12.6% annualized rate over the last five years, a step above the broader banking 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
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
The Bancorp’s EPS grew at 26.3% compounded annual growth rate over the last five years, higher than its 18.3% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity, or ROE, quantifies bank profitability relative to shareholder equity - an essential capital source for these institutions. Over extended periods, superior ROE performance drives faster shareholder wealth compounding through reinvestment, share repurchases, and dividend growth.
Over the last five years, The Bancorp has averaged an ROE of 24.7%, exceptional for a company operating in a sector where the average shakes out around 7.5% and those putting up 15%+ are greatly admired. This shows The Bancorp has a strong competitive moat.
Final Judgment
These are just a few reasons why we think The Bancorp is a high-quality business. With the recent decline, the stock trades at 3× forward P/B (or $54.19 per share). Is now the right time to buy? See for yourself in our in-depth research report, it’s free.
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