United Bankshares trades at $39.29 and has moved in lockstep with the market. Its shares have returned 5.8% over the last six months while the S&P 500 has gained 2.3%.
Is there a buying opportunity in United Bankshares, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think United Bankshares Will Underperform?
We don't have much confidence in United Bankshares. Here are three reasons we avoid UBSI and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
Two primary revenue streams drive bank earnings. While net interest income, which is earned by charging higher rates on loans than paid on deposits, forms the foundation, fee-based services across banking, credit, wealth management, and trading operations provide additional income.
Unfortunately, United Bankshares’s 3.4% annualized revenue growth over the last five years was sluggish. This was below our standard for the banking sector.
2. Net Interest Income Points to Soft Demand
Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.
United Bankshares’s net interest income has grown at a 4.8% annualized rate over the last five years, much worse than the broader banking industry. Its growth was driven by an increase in its net interest margin, which represents how much a bank earns in relation to its outstanding loans, as its loan book shrank throughout that period.
3. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
United Bankshares’s weak 4.6% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
United Bankshares falls short of our quality standards. That said, the stock currently trades at 1× forward P/B (or $39.29 per share). This multiple tells us a lot of good news is priced in - we think other companies feature superior fundamentals at the moment. We’d recommend looking at one of our all-time favorite software stocks.
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