Bank OZK has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 12.3% to $53.90 per share while the index has gained 8.8%.
Is now the time to buy OZK? Find out in our full research report, it’s free.
Why Does Bank OZK Spark Debate?
Founded in 1903 and rebranded from Bank of the Ozarks in 2018, Bank OZK (NASDAQ: OZK) is a commercial bank that specializes in real estate lending while offering a full range of banking services to individuals and businesses.
Two Positive Attributes:
1. Net Interest Income Skyrockets, Fueling Growth Opportunities
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.
Bank OZK’s net interest income has grown at a 12.6% annualized rate over the last five years, better than the broader banking industry.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Bank OZK’s EPS grew at an astounding 24.4% compounded annual growth rate over the last five years, higher than its 21.8% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Net Interest Margin Dropping
Net interest margin (NIM) represents the unit economics of a bank by measuring the profitability of its interest-bearing assets relative to its interest-bearing liabilities. It's a fundamental metric that investors use to assess lending premiums and returns.
Over the past two years, Bank OZK’s net interest margin averaged 4.6%. However, its margin contracted by 89 basis points (100 basis points = 1 percentage point) over that period.
This decline was a headwind for its net interest income. While prevailing rates are a major determinant of net interest margin changes over time, the decline could mean Bank OZK either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition. One caveat is that net interest margins can also decrease to reflect lower default risk if banks begin making more conservative loans.
Final Judgment
Bank OZK has huge potential even though it has some open questions, but at $53.90 per share (or 1× forward P/B), is now the right time to buy the stock? See for yourself in our in-depth research report, it’s free.
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