WaFd Bank 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 10.8% to $37.30 per share while the index has gained 8.9%.
Is now the time to buy WaFd Bank, 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 WaFd Bank Will Underperform?
We’re sitting this one out for now. Here are three reasons you should be careful with WAFD, 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.
WaFd Bank’s net interest income has grown at a 7.4% annualized rate over the last five years, worse than the broader banking industry and in line with its total revenue.
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 WaFd Bank’s net interest margin averaged a poor 2.7%, meaning it must compensate for lower profitability through increased loan originations.
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.
WaFd Bank’s unimpressive 9.2% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
We see the value of companies driving economic growth, but in the case of WaFd Bank, we’re out. That said, the stock currently trades at 1× forward P/B (or $37.30 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better stocks to buy right now. We’d suggest looking at the most entrenched endpoint security platform on the market.
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