Trustmark’s 16.1% return over the past six months has outpaced the S&P 500 by 9.7%, and its stock price has climbed to $44.34 per share. This run-up might have investors contemplating their next move.
Is now the time to buy Trustmark, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Trustmark Not Exciting?
We’re happy investors have made money, but we're cautious about Trustmark. Here are three reasons there are better opportunities than TRMK and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.
Trustmark’s net interest income has grown at a 9.1% annualized rate over the last five years, slightly worse than the broader banking 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. 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 Trustmark’s net interest income to rise by 4.3%, a deceleration versus its 9.4% annualized growth for the past two years. This projection is below its 9.4% annualized growth rate 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.
Trustmark’s weak 4.7% 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
Trustmark isn’t a terrible business, but it doesn’t pass our quality test. With its shares beating the market recently, the stock trades at 1.2× forward P/B (or $44.34 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d suggest looking at the most dominant software business in the world.
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