1 Surging Bank Stock to Research Further and 2 We Ignore

Each stock in this article is trading near its 52-week high. These elevated prices usually indicate some degree of investor confidence, business improvements, or favorable market conditions.

However, not all companies with momentum are long-term winners, and many investors have lost money by following short-term trends. All that said, here is one stock with the fundamentals to back up its performance and two that may correct.

Two Bank Stocks to Sell:

Preferred Bank (PFBC)

One-Month Return: +11.4%

Founded in 1991 with a focus on serving the Pacific Rim community in Southern California, Preferred Bank (NASDAQ:PFBC) is a commercial bank that provides banking products and services to small and mid-sized businesses, entrepreneurs, real estate developers, and high net worth individuals.

Why Is PFBC Not Exciting?

1. 9.9% annual net interest income growth over the last five years was slower than its banking peers
2. Concessions to defend its market share have ramped up over the last two years as its net interest margin decreased by 74 basis points (100 basis points = 1 percentage point)
3. Earnings per share decreased by more than its revenue over the last two years, showing each sale was less profitable

At $100.14 per share, Preferred Bank trades at 1.5x forward P/B. Dive into our free research report to see why there are better opportunities than PFBC.

Cathay General Bancorp (CATY)

One-Month Return: +11.5%

Founded in 1962 with its first branch in Los Angeles' Chinatown, Cathay General Bancorp (NASDAQ:CATY) operates Cathay Bank, providing commercial banking services to businesses and individuals with a strong presence in Asian-American communities.

Why Does CATY Give Us Pause?

1. Annual sales declines of 1.7% for the past two years show its products and services struggled to connect with the market during this cycle
2. Annual net interest income growth of 5.4% over the last five years was below our standards for the banking sector
3. Performance over the past two years shows each sale was less profitable as its earnings per share dropped by 7.5% annually, worse than its revenue

Cathay General Bancorp’s stock price of $50.96 implies a valuation ratio of 1.2x forward P/B. Read our free research report to see why you should think twice about including CATY in your portfolio.

One Bank Stock to Watch:

Popular (BPOP)

One-Month Return: +9%

Founded in 1893 as the first bank in Puerto Rico to serve the working class, Popular (NASDAQ:BPOP) is a financial holding company that provides retail, mortgage, and commercial banking services primarily in Puerto Rico and the mainland United States.

Why Does BPOP Stand Out?

1. Net interest margin expanded by 49.7 basis points (100 basis points = 1 percentage point) over the last two years, providing additional flexibility for investments
2. Share repurchases have increased shareholder returns as its annual earnings per share growth of 15.2% exceeded its revenue gains over the last five years
3. Balance sheet strength has increased this cycle as its 27% annual tangible book value per share growth over the last two years was exceptional

Popular is trading at $123.01 per share, or 1.3x forward P/B. Is now the right time to buy? See for yourself in our full research report, it’s free for active Edge members.

Stocks We Like Even More

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