Peoples Bancorp’s 26.5% return over the past six months has outpaced the S&P 500 by 19.7%, and its stock price has climbed to $38.51 per share. This run-up might have investors contemplating their next move.

Is now the time to buy Peoples Bancorp, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Do We Think Peoples Bancorp Will Underperform?

Despite the momentum, we don’t have much confidence in Peoples Bancorp. Here are three reasons you should be careful with PEBO, plus one stock we’d rather own.

1. Lackluster Revenue Growth

Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. Peoples Bancorp’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 2.1% over the last two years was well below its five-year trend. Note: Quarters not shown were determined to be outliers because they were impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

2. Net Interest Margin Dropping

Net interest margin (NIM) serves as a critical gauge of a bank’s fundamental profitability by showing the spread between interest income and interest expenses. It’s essential for understanding whether a firm can sustainably generate returns from its lending operations.

Over the past two years, Peoples Bancorp’s net interest margin averaged 4.2%. However, its margin contracted by 35.3 basis points (100 basis points = 1 percentage point) over that period.

This decline was a headwind for its net interest income. While prevailing rates are a major determinant of net interest margin changes over time, the decline could mean Peoples Bancorp either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition.

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.

Peoples Bancorp’s EPS grew at a weak 2.1% compounded annual growth rate over the last five years, lower than its 17.9% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

We cheer for all companies supporting the economy, but in the case of Peoples Bancorp, we’ll be cheering from the sidelines. With its shares outperforming the market lately, the stock trades at 1.1× forward P/B (or $38.51 per share). This valuation tells us a lot of optimism is priced in - we think there are better stocks to buy right now. We’d suggest looking at one of our top software and edge computing picks.

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