3 Reasons BY is Risky and 1 Stock to Buy Instead

Byline Bancorp trades at $31.86 per share and has stayed right on track with the overall market, gaining 10.9% over the last six months. At the same time, the S&P 500 has returned 6.2%.

Is now the time to buy Byline Bancorp, or should you be careful about including it in your portfolio? Dive into our full research report to see our analyst team’s opinion, it’s free.

Why Is Byline Bancorp Not Exciting?

We're cautious about Byline Bancorp. Here are three reasons you should be careful with BY and a 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. Byline Bancorp’s recent performance shows its demand has slowed as its annualized revenue growth of 7.4% over the last two years was below its five-year trend. We’re wary when companies in the sector see decelerations in revenue growth, as it could signal changing consumer tastes aided by low switching costs.

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 Byline Bancorp’s net interest income to rise by 4.4%, a deceleration versus its 8% annualized growth for the past two years. This projection is below its 8% annualized growth rate for the past two years.

3. Recent EPS Growth Below Our Standards

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Byline Bancorp’s EPS grew at a weak 2.4% compounded annual growth rate over the last two years, lower than its 7.4% annualized revenue growth. This tells us the company became less profitable on a per-share basis as it expanded.

Final Judgment

Byline Bancorp isn’t a terrible business, but it doesn’t pass our bar. That said, the stock currently trades at 1× forward P/B (or $31.86 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are superior stocks to buy right now. We’d recommend looking at one of our top digital advertising picks.

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