Although the S&P 500 is down 1.6% over the past six months, Community Bank’s stock price has fallen further to $55.13, losing shareholders 18.4% of their capital. This may have investors wondering how to approach the situation.
Is there a buying opportunity in Community Bank, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Community Bank Not Exciting?
Even with the cheaper entry price, we're cautious about Community Bank. Here are three reasons why there are better opportunities than CBU and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
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.
Community Bank’s net interest income has grown at a 5.6% annualized rate over the last four years, worse than the broader bank industry. Its growth was driven by an increase in its outstanding loans as its net interest margin, which represents how much a bank earns in relation to its outstanding loan book, was flat throughout that period.
2. Low Net Interest Margin Reveals Weak Loan Book Profitability
Revenue is a fine reference point for banks, but net interest income and margin are better indicators of business quality for banks because they’re balance sheet-driven businesses that leverage their assets to generate profits.
Over the past two years, we can see that Community Bank’s net interest margin averaged a weak 3.1%, reflecting its high servicing and capital costs.
3. Declining TBVPS Reflects Erosion of Asset Value
We consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation.
To the detriment of investors, Community Bank’s TBVPS declined at a 4.3% annual clip over the last five years.
Final Judgment
Community Bank isn’t a terrible business, but it isn’t one of our picks. After the recent drawdown, the stock trades at 1.5× forward P/B (or $55.13 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.
High-Quality Stocks for All Market Conditions
The market surged in 2024 and reached record highs after Donald Trump’s presidential victory in November, but questions about new economic policies are adding much uncertainty for 2025.
While the crowd speculates what might happen next, we’re homing in on the companies that can succeed regardless of the political or macroeconomic environment. Put yourself in the driver’s seat and build a durable portfolio by checking out our Top 5 Growth Stocks for this month. This is a curated list of our High Quality stocks that have generated a market-beating return of 183% over the last five years (as of March 31st 2025).
Stocks that made our list in 2020 include now familiar names such as Nvidia (+1,545% between March 2020 and March 2025) as well as under-the-radar businesses like the once-micro-cap company Tecnoglass (+1,754% five-year return). Find your next big winner with StockStory today.
