Over the past six months, NBT Bancorp has been a great trade, beating the S&P 500 by 8.9%. Its stock price has climbed to $51.51, representing a healthy 20.6% increase. This run-up might have investors contemplating their next move.
Is there a buying opportunity in NBT Bancorp, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is NBT Bancorp Not Exciting?
We’re happy investors have made money, but we’re sitting this one out for now. Here are three reasons why NBTB doesn’t excite us, plus one 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, NBT Bancorp’s revenue grew at a mediocre 9.7% compounded annual growth rate over the last five years. This fell short of our benchmark for the banking sector.
2. Projected Net Interest Income Growth Is Slim
Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect NBT Bancorp’s net interest income to rise by 5.8%, a deceleration versus its 18.4% annualized growth for the past two years. This projection is below its 18.4% annualized growth rate for the past two years.
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.
NBT Bancorp’s EPS grew at a weak 3% compounded annual growth rate over the last five years, lower than its 9.7% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
NBT Bancorp isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 1.3× forward P/B (or $51.51 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at one of our top software and edge computing picks.
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