Truist Financial has been treading water for the past six months, recording a small return of 1.1% while holding steady at $45.84. The stock also fell short of the S&P 500’s 8.1% gain during that period.

Is there a buying opportunity in Truist Financial, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Truist Financial Not Exciting?

We're swiping left on Truist Financial for now. Here are three reasons there are better opportunities than TFC and a stock we'd rather own.

1. Net Interest Income Hits a Plateau

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.

Truist Financial’s net interest income was flat over the last five years, much worse than the broader banking industry. This shows that lending underperformed its other business lines.

2. Low Net Interest Margin Reveals Weak Loan Book Profitability

Net interest margin (NIM) represents the unit economics of a bank by measuring the profitability of its interest-bearing assets relative to its interest-bearing liabilities. It's a fundamental metric that investors use to assess lending premiums and returns.

Over the past two years, we can see that Truist Financial’s net interest margin averaged a weak 3%, meaning it must compensate for lower profitability through increased loan originations.

3. EPS Trending Down

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.

Sadly for Truist Financial, its EPS declined by 1.2% annually over the last five years while its revenue grew by 2.3%. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Truist Financial’s business quality ultimately falls short of our standards. With its shares lagging the market recently, the stock trades at 1× forward P/B (or $45.84 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 a top digital advertising platform riding the creator economy.

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