Popular (BPOP) Margin Jumps to 25.7%, Undervaluation Challenges Cautious Narratives

Popular (BPOP) reported a net profit margin of 25.7%, a notable increase from 19.7% the previous year. Earnings climbed 40.9% over the last twelve months compared to a 4% average annual decline over the past five years. Looking ahead, analysts expect annual earnings growth of 6.7% and revenue growth of 6%, both slightly behind overall US market trends. However, the company stands out for its high-quality earnings and attractive dividend.

See our full analysis for Popular.

Now, let’s see how these numbers compare with the prevailing market narratives to find out where expectations are met and where surprises may lie in store.

See what the community is saying about Popular

Margin Holds as Analysts See Narrowing Ahead

• The current net profit margin stands at 25.7%, but analysts forecast a slight contraction to 24.7% over the next three years even as earnings are projected to rise to $930.2 million by September 2028.
  • Consensus narrative notes operational efficiency gains from digital upgrades are expected to boost long-term margins. However, ongoing investment and a maturing growth cycle may push profit margins off their peak.
  • Analysts see sustainable revenue expansion from modernization and fee-based services, but expect cost pressures and rising deposit competition to weigh slightly on future margin strength.
• Planned investments in digital platforms and infrastructure are expected to strengthen long-term revenue growth. Analysts believe that near-term cost discipline will be tested as competition for deposits intensifies.
  • The consensus narrative highlights the positive impact of enhanced digital services on customer growth and operational scale. At the same time, rising funding costs and a focus on compliance could limit the pace of margin improvement compared to broader US banks.
  • This creates a nuanced outlook, where digital transformation supports revenue stability, while external market pressures keep margins from expanding indefinitely.

📊 Read the full Popular Consensus Narrative.

Risks Centered on Puerto Rico Exposure

• Heightened concentration in Puerto Rico, combined with ongoing reliance on public sector deposits and loans, presents a material geographic risk that analysts say directly affects earnings resilience and long-term profitability.
  • The consensus narrative raises concerns around local economic volatility, demographic shifts, and natural disasters, which could suppress loan demand or impair asset quality, potentially disrupting the path to sustainable growth.
  • Rising regulatory and compliance costs specific to the Puerto Rican market, along with the threat of political disruption, may limit Popular’s flexibility to offset these regional headwinds by pivoting product or funding strategies.
• Slower adoption of digital banking compared to global peers increases Popular’s risk of losing out on fee-based income and market share, especially as fintech competitors intensify competition for customers.
  • According to the consensus narrative, the company’s modernizing efforts are a strong positive, but their relatively early stage means they may not yet be sufficient to fortify competitive defenses against digital-first rivals.
  • This lag could expose Popular to declining non-interest income and compressed net margins, putting added pressure on long-term earnings forecasts.

Discounted Valuation vs. Industry and DCF

• Popular is trading at $114.00 per share, representing a notable discount to both analyst consensus price targets ($145.56) and DCF fair value estimates ($256.58), with a price-to-earnings ratio of 10.7x versus a US banks industry average of 11.9x.
  • Consensus narrative suggests this undervaluation could create an opportunity if profit growth and margin trends meet expectations, as the stock’s pricing fails to fully reflect forecasted future earnings and ongoing digital investments.
  • Still, the gap implies investors remain cautious, likely weighing the company’s geographic risk, regulatory headwinds, and industry competition against its high-quality earnings and robust dividend profile.
• The analyst consensus price target sits 27.7% above the current share price, signaling that the broader market may be underestimating Popular’s potential to execute on its growth strategy and deliver sustained returns.
  • This disconnect between fundamentals and valuation is further highlighted by limited major identified risks, with only one minor risk noted and no substantial insider selling during the latest quarter, bolstering the positive case outlined by analysts’ consensus.
  • The stock’s dividend and multiple growth drivers offer potential upside if the company achieves forecasted operational targets and risk factors remain contained.

Next Steps

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for Popular on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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A great starting point for your Popular research is our analysis highlighting 6 key rewards and 1 important warning sign that could impact your investment decision.

See What Else Is Out There

Popular’s exposure to local economic volatility, stiffening competition, and potential margin erosion means its earnings may prove less resilient than those of steadier performers.

If stable results matter to you, use our stable growth stocks screener (2090 results) to find companies consistently delivering reliable revenue and earnings, regardless of uncertain market conditions.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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