Byline Bancorp trades at $29.19 per share and has stayed right on track with the overall market, gaining 13.1% over the last six months. At the same time, the S&P 500 has returned 14.4%.
Is now the time to buy Byline Bancorp, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free for active Edge members.
Why Is Byline Bancorp Not Exciting?
We're cautious about Byline Bancorp. Here are three reasons you should be careful with BY and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions.
Unfortunately, Byline Bancorp’s 9.8% annualized revenue growth over the last five years was mediocre. This fell short of our benchmark for the banking sector.
2. Net Interest Margin Dropping
Net interest margin (NIM) represents how much a bank earns in relation to its outstanding loans. It's one of the most important metrics to track because it shows how a bank's loans are performing and whether it has the ability to command higher premiums for its services.
Over the past two years, Byline Bancorp’s net interest margin averaged 4.1%. However, its margin contracted by 21.3 basis points (100 basis points = 1 percentage point) over that period.
This decline was a headwind for its net interest income. While prevailing rates are a major determinant of net interest margin changes over time, the decline could mean Byline Bancorp either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition.
3. Recent EPS Growth Below Our Standards
While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.
Byline Bancorp’s EPS grew at a weak 2.3% compounded annual growth rate over the last two years, lower than its 7.7% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Byline Bancorp’s business quality ultimately falls short of our standards. That said, the stock currently trades at 1× forward P/B (or $29.19 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're fairly confident there are better stocks to buy right now. We’d recommend looking at a top digital advertising platform riding the creator economy.
Stocks We Would Buy Instead of Byline Bancorp
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