Wall Street’s bearish price targets for the stocks in this article signal serious concerns. Such forecasts are uncommon in an industry where maintaining cordial corporate relationships often trumps delivering the hard truth.
Accurately determining a company’s long-term prospects isn’t easy, especially when sentiment is weak. That’s where StockStory comes in - to help you find attractive investment candidates backed by unbiased research. Keeping that in mind, here are three stocks facing legitimate challenges and some alternatives worth exploring instead.
Zions Bancorporation (ZION)
Consensus Price Target: $68.75 (3.4% implied return)
Founded in 1873 during Utah's pioneer era and named after Mount Zion in the Bible, Zions Bancorporation (NASDAQ: ZION) operates seven regional banks across the Western United States, providing commercial, retail, and wealth management services to over a million customers.
Why Are We Wary of ZION?
- Annual net interest income growth of 3.8% over the last five years was below our standards for the banking sector
- Earnings growth underperformed the sector average over the last five years as its EPS grew by just 5.3% annually
- Muted 1.5% annual tangible book value per share growth over the last five years shows its capital generation lagged behind its banking peers
At $66.47 per share, Zions Bancorporation trades at 1.2x forward P/B. To fully understand why you should be careful with ZION, check out our full research report (it’s free).
WesBanco (WSBC)
Consensus Price Target: $39.25 (8.9% implied return)
Tracing its roots back to 1870 in West Virginia, WesBanco (NASDAQ: WSBC) is a bank holding company that provides retail and commercial banking, trust services, insurance, and investment products through its subsidiaries across several Midwestern and Mid-Atlantic states.
Why Do We Think Twice About WSBC?
- Net interest margin of 3.4% is well below other banks, signaling its loans aren’t very profitable
- Products and services are facing profitability challenges during this cycle, as seen in its flat tangible book value per share over the last five years
- Below-average return on equity indicates management struggled to find compelling investment opportunities
WesBanco’s stock price of $36.04 implies a valuation ratio of 0.9x forward P/B. Check out our free in-depth research report to learn more about why WSBC doesn’t pass our bar.
OFG Bancorp (OFG)
Consensus Price Target: $47.75 (0.8% implied return)
Originally founded in 1964 as a federal savings and loan institution, OFG Bancorp (NYSE: OFG) provides banking and financial services including commercial and consumer lending, wealth management, insurance, and trust services primarily in Puerto Rico and the U.S. Virgin Islands.
Why Is OFG Not Exciting?
- Muted 8.8% annual net interest income growth over the last five years shows its demand lagged behind its banking peers
- Net interest income is projected to tank by 2.2% over the next 12 months as demand evaporates
- Net interest margin dropped by 55.7 basis points (100 basis points = 1 percentage point) over the last two years, implying the firm’s loan book profitability fell as competitors entered the market
OFG Bancorp is trading at $47.39 per share, or 1.4x forward P/B. If you’re considering OFG for your portfolio, see our FREE research report to learn more.
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