3 Reasons to Avoid CMA and 1 Stock to Buy Instead

Comerica has been treading water for the past six months, recording a small return of 2.7% while holding steady at $68.89.

Is now the time to buy Comerica, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is Comerica Not Exciting?

We're cautious about Comerica. Here are three reasons why there are better opportunities than CMA and a stock we'd rather own.

1. Net Interest Income Points to Soft Demand

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

Comerica’s net interest income has grown at a 3.2% annualized rate over the last five years, worse than the broader banking industry.

2. EPS Barely Growing

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Comerica’s EPS grew at an unimpressive 4.4% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 1.2% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.

3. Growing TBVPS Reflects Strong Asset Base

For banks, tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.

Although Comerica’s TBVPS was flat over the last five years. the good news is that its growth has recently accelerated as TBVPS grew at an excellent 17.7% annual clip over the past two years (from $34.61 to $47.97 per share).

Final Judgment

Comerica isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 1.3× forward P/B (or $68.89 per share). This multiple tells us a lot of good news is priced in - we think there are better opportunities elsewhere. We’d recommend looking at one of our top digital advertising picks.

Stocks We Would Buy Instead of Comerica

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