2 Reasons to Like PNFP and 1 to Stay Skeptical

Over the past six months, Pinnacle Financial Partners’s stock price fell to $85.71. Shareholders have lost 18.8% of their capital, which is disappointing considering the S&P 500 has climbed by 19.8%. This might have investors contemplating their next move.

Following the pullback, is this a buying opportunity for PNFP? Find out in our full research report, it’s free for active Edge members.

Why Does PNFP Stock Spark Debate?

Founded in 2000 with a focus on delivering big-bank capabilities with community bank personalization, Pinnacle Financial Partners (NASDAQ:PNFP) is a Tennessee-based financial holding company that provides banking, investment, trust, mortgage, and insurance services to businesses and individuals.

Two Positive Attributes:

1. Net Interest Income Skyrockets, Fueling Growth Opportunities

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.

Pinnacle Financial Partners’s net interest income has grown at a 13.7% annualized rate over the last five years, better than the broader banking industry and in line with its total revenue. Its growth was driven by an increase in its net interest margin, which represents how much a bank earns in relation to its outstanding loans, as its loan book shrank throughout that period.

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.

Pinnacle Financial Partners’s astounding 15.1% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.

One Reason to be Careful:

Low Net Interest Margin Reveals Weak Loan Book Profitability

The net interest margin (NIM) is a key profitability indicator that measures the difference between what a bank earns on its loans and what it pays on its deposits. This metric measures how efficiently one can generate income from its core lending activities.

Over the past two years, we can see that Pinnacle Financial Partners’s net interest margin averaged a subpar 3.2%, reflecting its high servicing and capital costs.

Final Judgment

Pinnacle Financial Partners’s positive characteristics outweigh the negatives. With the recent decline, the stock trades at 1× forward P/B (or $85.71 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free for active Edge members .

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