3 Reasons CVBF is Risky and 1 Stock to Buy Instead

CVB Financial currently trades at $19.14 per share and has shown little upside over the past six months, posting a small loss of 3.8%. The stock also fell short of the S&P 500’s 7.7% gain during that period.

Is now the time to buy CVB Financial, 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 Do We Think CVB Financial Will Underperform?

We're sitting this one out for now. Here are three reasons we avoid CVBF and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions.

Over the last five years, CVB Financial grew its revenue at a sluggish 2.3% compounded annual growth rate. This was below our standards.

2. 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.

CVB Financial’s net interest income has grown at a 2% annualized rate over the last five years, much worse than the broader banking industry and in line with its total revenue. 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.

3. EPS Barely Growing

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

CVB Financial’s weak 3% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.

Final Judgment

We cheer for all companies supporting the economy, but in the case of CVB Financial, we’ll be cheering from the sidelines. With its shares trailing the market in recent months, the stock trades at 1.1× forward P/B (or $19.14 per share). At this valuation, there’s a lot of good news priced in - we think other companies feature superior fundamentals at the moment. Let us point you toward one of Charlie Munger’s all-time favorite businesses.

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