U.S. Bancorp trades at $49.14 and has moved in lockstep with the market. Its shares have returned 12.4% over the last six months while the S&P 500 has gained 14.9%.

Is now the time to buy U.S. Bancorp, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is U.S. Bancorp Not Exciting?

We're swiping left on U.S. Bancorp for now. Here are three reasons why USB doesn't excite us and a stock we'd rather own.

1. Net Interest Income Points to Soft Demand

Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.

U.S. Bancorp’s net interest income has grown at a 4.9% annualized rate over the last five years, worse than the broader banking 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. Low Net Interest Margin Reveals Weak Loan Book Profitability

Net interest margin (NIM) represents how much a bank earns in relation to its outstanding loans. It's one of the most important metrics to track because it shows how a bank's loans are performing and whether it has the ability to command higher premiums for its services.

Over the past two years, we can see that U.S. Bancorp’s net interest margin averaged a weak 2.7%, reflecting its high servicing and capital costs.

3. Steady Increase in TBVPS Highlights Solid Asset Growth

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.

Although U.S. Bancorp’s TBVPS increased by a meager 2% annually over the last five years, the good news is that its growth has recently accelerated as TBVPS grew at a solid 13.6% annual clip over the past two years (from $20.04 to $25.86 per share).

Final Judgment

U.S. Bancorp isn’t a terrible business, but it isn’t one of our picks. That said, the stock currently trades at 1.4× forward P/B (or $49.14 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. We’d recommend looking at the most entrenched endpoint security platform on the market.

Stocks We Like More Than U.S. Bancorp

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