FMP

FMP

Enter

Comparative Analysis of ROIC vs. WACC in the Banking Sector

- (Last modified: Sep 2, 2024 7:11 AM)

twitterlinkedinfacebook
blog post cover photo

Image credit: Google Images

  • Customers Bancorp, Inc. (NYSE:CUBI) showcases a promising growth trajectory with a ROIC/WACC ratio of 1.10, indicating efficient capital utilization.
  • National Bank Holdings Corporation (NYSE:NBHC) leads with the highest ROIC/WACC ratio of 1.41, highlighting superior financial management and growth potential.
  • The banking sector presents varied efficiency in capital utilization, with Customers Bancorp, Inc. and National Bank Holdings Corporation standing out for their operational efficiency and profitability.

Customers Bancorp, Inc. (NYSE:CUBI) serves as a pivotal player in the banking sector, offering a broad spectrum of financial services and products through Customers Bank. With a current stock price of $51.82 and an ambitious target price of $86.31, CUBI is on a trajectory of promising growth. The company's financial health is further underscored by its Weighted Average Cost of Capital (WACC) at 8.47% and its Return on Invested Capital (ROIC) at 9.28%. The ROIC to WACC ratio of 1.10 signifies that CUBI is proficiently generating returns that surpass its cost of capital, marking a positive indicator for potential investors.

In the competitive landscape, ConnectOne Bancorp, Inc. (NASDAQ:CNOB) emerges as a regional contender, primarily serving the Northern New Jersey and New York Metropolitan area. Despite its strategic positioning, CNOB's ROIC/WACC ratio of 0.66 points to a less efficient generation of returns over its cost of capital when compared to CUBI. This discrepancy highlights CUBI's superior financial management and operational efficiency in a competitive market.

Metropolitan Bank Holding Corp. (NYSE:MCB) and Banc of California, Inc. (NYSE:BANC) present varied challenges in generating returns above their respective costs of capital. MCB's higher WACC at 13.12% coupled with a ROIC/WACC ratio of 0.58 suggests a demanding environment for surpassing capital costs. Similarly, BANC's negative ROIC indicates struggles in achieving positive returns, further emphasized by a ROIC/WACC ratio of -0.41. These figures underscore the competitive advantage held by CUBI in maintaining profitability and operational efficiency.

First Foundation Inc. (NASDAQ:FFWM) and National Bank Holdings Corporation (NYSE:NBHC) showcase distinct financial dynamics. FFWM, despite a high WACC of 16.54%, boasts a ROIC/WACC ratio of 1.11, slightly edging out CUBI and indicating a strong capability in generating returns. Conversely, NBHC stands out with the highest ROIC/WACC ratio of 1.41 among the peers, signaling the most efficient capital utilization to generate returns. This efficiency not only highlights NBHC's superior financial management but also positions it as a leading entity in terms of growth potential based on this metric.

The analysis of ROIC versus WACC among Customers Bancorp, Inc. and its closest peers reveals a landscape of varied efficiency in capital utilization and return generation. While CUBI demonstrates effective capital management and promising growth potential, National Bank Holdings Corporation emerges as the frontrunner, showcasing the highest efficiency in generating returns over its cost of capital. This comparative insight provides a valuable perspective for investors seeking opportunities in the banking sector, emphasizing the importance of financial metrics in assessing company performance and potential.

Other Blogs

Sep 10, 2024 11:33 AM - Parth Sanghvi

Best Alternatives to Yahoo Finance for Downloading Historical Stock Data

When it comes to downloading historical stock data, Yahoo Finance has been a popular choice for many. However, for those looking for more comprehensive, accurate, and flexible options, Financial Modeling Prep (FMP) offers a suite of powerful tools and services that stand out as superior alternatives...

blog post title

Nov 8, 2024 10:30 AM - Sanzhi Kobzhan

Understanding Equity Valuation: When to Use DCF, DDM, and Price-Income (Multiplicators) Models

When it comes to investing in stocks, one of the key decisions an investor must make involves determining the intrinsic value of a company's shares. Equity valuation isn't just about numbers, it's an art mixed with science, aiming to predict future performance based on current and historical data. H...

blog post title

Nov 22, 2024 10:08 AM - Parth Sanghvi

Fundamental Analysis: Principles, Types, and How to Use It

Fundamental analysis is one of the most essential tools for investors and analysts alike, helping them assess the intrinsic value of a stock, company, or even an entire market. It focuses on the financial health and economic position of a company, often using key data such as earnings, expenses, ass...

blog post title
FMP

FMP

Financial Modeling Prep API provides real time stock price, company financial statements, major index prices, stock historical data, forex real time rate and cryptocurrencies. Financial Modeling Prep stock price API is in real time, the company reports can be found in quarter or annual format, and goes back 30 years in history.
twitterlinkedin
2017-2025 © Financial Modeling Prep