Over the past six months, Merchants Bancorp’s shares (currently trading at $35.16) have posted a disappointing 11.5% loss, well below the S&P 500’s 4.1% gain. This was partly driven by its softer quarterly results and might have investors contemplating their next move.

Following the drawdown, is now an opportune time to buy MBIN? Find out in our full research report, it’s free.

Why Is MBIN a Good Business?

With a strategic focus on low-risk, government-backed lending programs, Merchants Bancorp (NASDAQCM:MBIN) is an Indiana-based bank holding company specializing in multi-family mortgage banking, mortgage warehousing, and traditional banking services.

1. Net Interest Income Skyrockets, Fueling Growth Opportunities

While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.

Merchants Bancorp’s net interest income has grown at a 19.1% annualized rate over the last four years, much better than the broader bank industry. 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.

2. Outstanding Long-Term EPS Growth

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.

Merchants Bancorp’s EPS grew at an astounding 21.4% compounded annual growth rate over the last five years. This performance was better than most bank businesses.

3. Growing TBVPS Reflects Strong Asset Base

In the banking industry, tangible book value per share (TBVPS) provides the clearest picture of shareholder value, as it focuses on concrete assets while excluding intangible items that may not hold value during challenging times.

Merchants Bancorp’s TBVPS increased by 27.8% annually over the last five years, and although its annualized growth has recently decelerated to 23.5% over the last two years (from $22.88 to $34.90 per share), we still think its performance was incredible.

Final Judgment

These are just a few reasons Merchants Bancorp is a high-quality business worth owning. With the recent decline, the stock trades at 0.8× forward P/B (or $35.16 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.

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