S&T Bancorp has had an impressive run over the past six months as its shares have beaten the S&P 500 by 10.3%. The stock now trades at $52.35, marking a 19.2% gain. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now the time to buy S&T Bancorp, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.

Why Do We Think S&T Bancorp Will Underperform?

Despite the momentum, we’re passing on S&T Bancorp for now. Here are three reasons we avoid STBA, plus one stock we’d rather own.

1. Net Interest Income Points to Soft Demand

Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.

S&T Bancorp’s net interest income has grown at a 5.2% annualized rate over the last five years, much worse than the broader banking industry.

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 S&T Bancorp’s net interest income to rise by 4.1%, close to its 2.8% annualized growth for the past two years.

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.

S&T Bancorp’s EPS grew at 7.8% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 3.9% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

Final Judgment

S&T Bancorp falls short of our quality standards. With its shares beating the market recently, the stock trades at 1.3× forward P/B (or $52.35 per share). This multiple tells us a lot of good news is priced in - you can find more timely opportunities elsewhere. We’d suggest looking at the most dominant software business in the world.

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