Over the past six months, Pinnacle Financial Partners’s stock price fell to $95.65. Shareholders have lost 12.9% of their capital, which is disappointing considering the S&P 500 has climbed by 15.5%. This might have investors contemplating their next move.
Following the drawdown, is now an opportune time to buy PNFP? Find out in our full research report, it’s free.
Why Does Pinnacle Financial Partners Spark Debate?
Founded in 2000 with a focus on delivering big-bank capabilities with community bank personalization, Pinnacle Financial Partners (NASDAQ: PNFP) is a Tennessee-based financial holding company that provides banking, investment, trust, mortgage, and insurance services to businesses and individuals.
Two Positive Attributes:
1. Net Interest Income Skyrockets, Fueling Growth Opportunities
While bank generate revenue from multiple sources, investors view net interest income as a cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of one-time fees.
Pinnacle Financial Partners’s net interest income has grown at a 13.5% annualized rate over the last four years, better than the broader banking industry.
2. Forecasted Efficiency Ratio Shows Stronger Profits Ahead
The underlying profitability of top-line growth determines the actual bottom-line impact. Banking institutions measure this dynamic using the efficiency ratio, which is calculated by dividing non-interest expenses like personnel, facilities, technology, and marketing by total revenue.
Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.
For the next 12 months, Wall Street expects Pinnacle Financial Partners to rein in some of its expenses as it anticipates an efficiency ratio of 56% compared to 63% over the past year.
One Reason to be Careful:
Lackluster Revenue Growth
We at StockStory place the most emphasis on long-term growth, but within financials, a stretched historical view may miss recent interest rate changes, market returns, and industry trends. Pinnacle Financial Partners’s recent performance shows its demand has slowed significantly as its annualized revenue growth of 4.4% over the last two years was well below its five-year trend. 
Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.
Final Judgment
Pinnacle Financial Partners has huge potential even though it has some open questions. After the recent drawdown, the stock trades at 1.1× forward P/B (or $95.65 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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