What a brutal six months it’s been for Live Oak Bancshares. The stock has dropped 22.3% and now trades at $31.04, rattling many shareholders. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.

Given the weaker price action, is now the 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

Our experience and research show the market cares primarily about a bank’s net interest income growth as non-interest income is considered a lower-quality and non-recurring revenue source.

Live Oak Bancshares’s net interest income has grown at a 14.5% annualized rate over the last four years, 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

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 59.2% compounded annual growth rate over the last five years, higher than its 19.7% 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 11.3% annually over the last five years, and although its annualized growth has recently decelerated a bit to 10.1% over the last two years (from $18.58 to $22.53 per share), we still think its performance was decent.

Final Judgment

These are just a few reasons why we think Live Oak Bancshares is a high-quality business. After the recent drawdown, the stock trades at 1.3× forward P/B (or $31.04 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.

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