Live Oak Bancshares has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 10.5% to $39.03 per share while the index has gained 8.4%.
Is there a buying opportunity in Live Oak Bancshares, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Live Oak Bancshares Not Exciting?
We’re swiping left on Live Oak Bancshares for now. Here are two reasons why there are better opportunities than LOB, plus one stock we’d rather own.
1. Low Net Interest Margin Reveals Weak Loan Book Profitability
Net interest margin (NIM) serves as a critical gauge of a bank’s fundamental profitability by showing the spread between interest income and interest expenses. It’s essential for understanding whether a firm can sustainably generate returns from its lending operations.
Over the past two years, we can see that Live Oak Bancshares’s net interest margin averaged a subpar 3.3%, reflecting its high servicing and capital costs.
2. EPS Trending Down
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.
Sadly for Live Oak Bancshares, its EPS declined by 2.3% annually over the last five years while its revenue grew by 12.3%. This tells us the company became less profitable on a per-share basis as it expanded.
Final Judgment
Live Oak Bancshares’s business quality ultimately falls short of our standards. That said, the stock currently trades at 1.4× forward P/B (or $39.03 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. Let us point you toward a top digital advertising platform riding the creator economy.
Stocks We Would Buy Instead of Live Oak Bancshares
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