Over the last six months, Merchants Bancorp’s shares have sunk to $31.31, producing a disappointing 13.4% loss - a stark contrast to the S&P 500’s 1.1% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.
Following the pullback, is now an opportune time to buy MBIN? Find out in our full research report, it’s free.
Why Is MBIN a Good Business?
With a strategic focus on low-risk, government-backed lending programs, Merchants Bancorp (NASDAQCM:MBIN) is an Indiana-based bank holding company specializing in multi-family mortgage banking, mortgage warehousing, and traditional banking services.
1. Net Interest Income Skyrockets, Fueling Growth Opportunities
Markets consistently prioritize net interest income growth over fee-based revenue, recognizing its superior quality and recurring nature compared to the more unpredictable non-interest income streams.
Merchants Bancorp’s net interest income has grown at a 19.1% annualized rate over the last four years, much better than the broader bank industry. Its growth was driven by both an increase in its outstanding loans and net interest margin, which represents how much a bank earns in relation to its outstanding loan book.
2. Outstanding Long-Term EPS Growth
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.
Merchants Bancorp’s EPS grew at an astounding 24.2% compounded annual growth rate over the last five years. This performance was better than most bank businesses.
3. Growing TBVPS Reflects Strong Asset Base
In the banking industry, tangible book value per share (TBVPS) provides the clearest picture of shareholder value, as it focuses on concrete assets while excluding intangible items that may not hold value during challenging times.
Merchants Bancorp’s TBVPS increased by 27.8% annually over the last five years, and although its annualized growth has recently decelerated to 23.5% over the last two years (from $22.88 to $34.90 per share), we still think its performance was incredible.
Final Judgment
These are just a few reasons why we think Merchants Bancorp is a great business. After the recent drawdown, the stock trades at 0.7× forward P/B (or $31.31 per share). Is now a good time to buy? See for yourself in our in-depth research report, it’s free.
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