U.S. Bancorp trades at $62.69 and has moved in lockstep with the market. Its shares have returned 14.7% over the last six months while the S&P 500 has gained 11.7%.

Is now the time to buy U.S. Bancorp, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.

Why Is U.S. Bancorp Not Exciting?

We’re sitting this one out for now. Here are three reasons you should be careful with USB, plus one 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 a cornerstone — its predictable, recurring characteristics stand in sharp contrast to the volatility of one-time fees.

U.S. Bancorp’s net interest income has grown at a 6.4% annualized rate over the last five years, worse than the broader banking industry and in line with its total revenue. 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. Low Net Interest Margin Reveals Weak Loan Book Profitability

Net interest margin (NIM) represents the unit economics of a bank by measuring the profitability of its interest-bearing assets relative to its interest-bearing liabilities. It’s a fundamental metric that investors use to assess lending premiums and returns.

Over the past two years, we can see that U.S. Bancorp’s net interest margin averaged a weak 2.7%, reflecting its high servicing and capital costs.

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.

U.S. Bancorp’s EPS grew at a weak 1.4% compounded annual growth rate over the last five years, lower than its 5.4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

U.S. Bancorp isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 1.5× forward P/B (or $62.69 per share). Investors with a higher risk tolerance might like the company, but we think the potential downside is too great. We’re pretty confident there are more exciting stocks to buy at the moment. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.

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