Stock Analysis

Here's Why I Think Customers Bancorp (NYSE:CUBI) Is An Interesting Stock

  •  Updated
NYSE:CUBI
Source: Shutterstock

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to investors, even if it completely lacks a track record of revenue and profit. But the reality is that when a company loses money each year, for long enough, its investors will usually take their share of those losses.

So if you're like me, you might be more interested in profitable, growing companies, like Customers Bancorp (NYSE:CUBI). While profit is not necessarily a social good, it's easy to admire a business that can consistently produce it. Loss-making companies are always racing against time to reach financial sustainability, but time is often a friend of the profitable company, especially if it is growing.

Check out our latest analysis for Customers Bancorp

Customers Bancorp's Earnings Per Share Are Growing.

If you believe that markets are even vaguely efficient, then over the long term you'd expect a company's share price to follow its earnings per share (EPS). That makes EPS growth an attractive quality for any company. Who among us would not applaud Customers Bancorp's stratospheric annual EPS growth of 42%, compound, over the last three years? That sort of growth never lasts long, but like a shooting star it is well worth watching when it happens.

Careful consideration of revenue growth and earnings before interest and taxation (EBIT) margins can help inform a view on the sustainability of the recent profit growth. Not all of Customers Bancorp's revenue this year is revenue from operations, so keep in mind the revenue and margin numbers I've used might not be the best representation of the underlying business. Customers Bancorp maintained stable EBIT margins over the last year, all while growing revenue 67% to US$536m. That's progress.

You can take a look at the company's revenue and earnings growth trend, in the chart below. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:CUBI Earnings and Revenue History June 3rd 2021

In investing, as in life, the future matters more than the past. So why not check out this free interactive visualization of Customers Bancorp's forecast profits?

Are Customers Bancorp Insiders Aligned With All Shareholders?

It makes me feel more secure owning shares in a company if insiders also own shares, thusly more closely aligning our interests. As a result, I'm encouraged by the fact that insiders own Customers Bancorp shares worth a considerable sum. Indeed, they have a glittering mountain of wealth invested in it, currently valued at US$104m. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

It's good to see that insiders are invested in the company, but are remuneration levels reasonable? A brief analysis of the CEO compensation suggests they are. For companies with market capitalizations between US$1.0b and US$3.2b, like Customers Bancorp, the median CEO pay is around US$3.7m.

Customers Bancorp offered total compensation worth US$2.3m to its CEO in the year to . That seems pretty reasonable, especially given its below the median for similar sized companies. While the level of CEO compensation isn't a huge factor in my view of the company, modest remuneration is a positive, because it suggests that the board keeps shareholder interests in mind. I'd also argue reasonable pay levels attest to good decision making more generally.

Is Customers Bancorp Worth Keeping An Eye On?

Customers Bancorp's earnings have taken off like any random crypto-currency did, back in 2017. The cherry on top is that insiders own a bucket-load of shares, and the CEO pay seems really quite reasonable. The sharp increase in earnings could signal good business momentum. Customers Bancorp certainly ticks a few of my boxes, so I think it's probably well worth further consideration. However, before you get too excited we've discovered 4 warning signs for Customers Bancorp (1 doesn't sit too well with us!) that you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

If you’re looking to trade Customers Bancorp, open an account with the lowest-cost* platform trusted by professionals, Interactive Brokers. Their clients from over 200 countries and territories trade stocks, options, futures, forex, bonds and funds worldwide from a single integrated account. Promoted


What are the risks and opportunities for Customers Bancorp?

Customers Bancorp, Inc. operates as the bank holding company for Customers Bank that provides financial products and services to individual consumers, and small and middle market businesses.

View Full Analysis

Rewards

  • Trading at 64.5% below our estimate of its fair value

Risks

  • Earnings are forecast to decline by an average of 2.4% per year for the next 3 years

View all Risks and Rewards

Share Price

Market Cap

1Y Return

View Company Report