Although Eastern Bank (currently trading at $18.23 per share) has gained 7.6% over the last six months, it has trailed the S&P 500’s 16.2% return during that period. This might have investors contemplating their next move.

Is there a buying opportunity in Eastern Bank, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Eastern Bank Not Exciting?

We're swiping left on Eastern Bank for now. Here are three reasons there are better opportunities than EBC and a stock we'd rather own.

1. Long-Term Revenue Growth Disappoints

In general, banks make money from two primary sources. The first is net interest income, which is interest earned on loans, mortgages, and investments in securities minus interest paid out on deposits. The second source is non-interest income, which can come from bank account, credit card, wealth management, investing banking, and trading fees.

Regrettably, Eastern Bank’s revenue grew at a tepid 1.5% compounded annual growth rate over the last five years. This fell short of our benchmarks.

2. Substandard TBVPS Growth Indicates Limited Asset Expansion

For banks, tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.

Disappointingly for investors, Eastern Bank’s TBVPS grew at a tepid 7.7% annual clip over the last two years.

3. TBVPS Projections Show Stormy Skies Ahead

The key to tangible book value per share (TBVPS) growth is a bank’s ability to earn consistent returns on its assets that exceed its funding costs and credit losses.

Over the next 12 months, Consensus estimates call for Eastern Bank’s TBVPS to shrink by 5.5% to $12.62, a sour projection.

Final Judgment

Eastern Bank isn’t a terrible business, but it isn’t one of our picks. With its shares lagging the market recently, the stock trades at 1.1× forward P/B (or $18.23 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are superior stocks to buy right now. Let us point you toward one of our top digital advertising picks.

Stocks We Would Buy Instead of Eastern Bank

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