City Holding (CHCO): Buy, Sell, or Hold Post Q3 Earnings?

City Holding currently trades at $123.25 per share and has shown little upside over the past six months, posting a middling return of 3.1%. The stock also fell short of the S&P 500’s 13.4% gain during that period.

Is there a buying opportunity in City Holding, or does it present a risk to your portfolio? Get the full stock story straight from our expert analysts, it’s free for active Edge members.

Why Is City Holding Not Exciting?

We're swiping left on City Holding for now. Here are three reasons we avoid CHCO and a stock we'd rather own.

1. Net Interest Income Points to Soft Demand

Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.

City Holding’s net interest income has grown at a 8.2% annualized rate over the last five years, worse than the broader banking 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. Projected Net Interest Income Growth Is Slim

Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect City Holding’s net interest income to rise by 5%.

3. Recent EPS Growth Below Our Standards

Although long-term earnings trends give us the big picture, we like to analyze EPS over a shorter period to see if we are missing a change in the business.

City Holding’s weak 2.9% annual EPS growth over the last two years aligns with its revenue trend. This tells us it maintained its per-share profitability as it expanded.

Final Judgment

City Holding’s business quality ultimately falls short of our standards. With its shares lagging the market recently, the stock trades at 2.2× forward P/B (or $123.25 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now. Let us point you toward a safe-and-steady industrials business benefiting from an upgrade cycle.

Stocks We Would Buy Instead of City Holding

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