Over the past six months, Live Oak Bancshares’s shares (currently trading at $31.83) have posted a disappointing 8.5% loss, well below the S&P 500’s 5.4% gain. This may have investors wondering how to approach the situation.
Given the weaker price action, is now a good time to buy LOB? Find out in our full research report, it’s free.
Why Are We Positive On LOB?
Founded during the 2008 financial crisis with a vision to reimagine small business banking through technology, Live Oak Bancshares (NYSE: LOB) is a bank holding company that specializes in providing online banking services and SBA-guaranteed loans to small businesses across targeted industries nationwide.
1. Net Interest Income Skyrockets, Fueling Growth Opportunities
While bank generate revenue from multiple sources, investors view net interest income as a cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of one-time fees.
Live Oak Bancshares’s net interest income has grown at a 20.9% annualized rate over the last five years, much better than the broader bank industry and faster than its total revenue. This was driven by its loan growth as its net interest margin, which represents how much a bank earns in relation to its outstanding loan book, declined throughout that period.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Live Oak Bancshares’s EPS grew at an astounding 51.2% compounded annual growth rate over the last five years, higher than its 18.9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
3. TBVPS Growth Demonstrates Strong Asset Foundation
Tangible book value per share (TBVPS) serves as a key indicator of a bank’s financial strength, representing the hard assets available to shareholders after removing intangible assets that could evaporate during financial distress.
Live Oak Bancshares’s TBVPS increased by 11.4% annually over the last five years, and the past two years show a similar trajectory as TBVPS grew at a decent 11.3% annual clip (from $18.77 to $23.27 per share).
Final Judgment
These are just a few reasons why we think Live Oak Bancshares is a high-quality business. With the recent decline, the stock trades at 1.3× forward P/B (or $31.83 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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