Customers Bancorp trades at $79.14 per share and has stayed right on track with the overall market, gaining 6.2% over the last six months. At the same time, the S&P 500 has returned 8.5%.
Is there a buying opportunity in Customers Bancorp, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Customers Bancorp Not Exciting?
We don’t have much confidence in Customers Bancorp. Here are three reasons we avoid CUBI, plus one stock we’d rather own.
1. Lackluster Revenue Growth
Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. Customers Bancorp’s recent performance shows its demand has slowed as its annualized revenue growth of 7.6% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs. 
Note: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
2. Low Net Interest Margin Reveals Weak Loan Book Profitability
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, we can see that Customers Bancorp’s net interest margin averaged a subpar 3.3%, indicating the company has weak loan book economics.
3. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Customers Bancorp’s EPS grew at an unimpressive 7.5% compounded annual growth rate over the last five years, lower than its 12% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Customers Bancorp isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 1.1× forward P/B (or $79.14 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We’re pretty confident there are superior stocks to buy right now. We’d suggest looking at our favorite semiconductor picks and shovels play.
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