Over the past six months, Veritex Holdings has been a great trade, beating the S&P 500 by 17%. Its stock price has climbed to $33.78, representing a healthy 35.3% increase. This performance may have investors wondering how to approach the situation.

Is there a buying opportunity in Veritex Holdings, or does it present a risk to your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.

Why Is Veritex Holdings Not Exciting?

We’re glad investors have benefited from the price increase, but we don't have much confidence in Veritex Holdings. Here are three reasons we avoid VBTX and a stock we'd rather own.

1. Revenue Tumbling Downwards

Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. Veritex Holdings’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 2.9% over the last two years. 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.

2. Projected Net Interest Income Growth Is Slim

Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.

Over the next 12 months, sell-side analysts expect Veritex Holdings’s net interest income to rise by 1.5%.

3. EPS Took a Dip Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Sadly for Veritex Holdings, its EPS declined by more than its revenue over the last two years, dropping 13.3%. This tells us the company struggled to adjust to shrinking demand.

Final Judgment

Veritex Holdings isn’t a terrible business, but it isn’t one of our picks. With its shares beating the market recently, the stock trades at 1.1× forward P/B (or $33.78 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. Let us point you toward one of our top digital advertising picks.

Stocks We Like More Than Veritex Holdings

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