Trustmark has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 8.4% to $48.43 per share while the index has gained 11.7%.
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Why Is Trustmark Not Exciting?
We’re passing on Trustmark for now. Here are three reasons why there are better opportunities than TRMK, plus one stock we’d rather own.
1. Net Interest Income Points to Soft Demand
Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.
Trustmark’s net interest income has grown at a 8.6% annualized rate over the last five years, slightly 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. 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 Trustmark’s net interest income to rise by 4.1%, a deceleration versus its 9.9% annualized growth for the past two years. This projection is below its 9.9% annualized growth rate for the past two years.
3. EPS Barely Growing
Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.
Trustmark’s weak 3.9% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
Trustmark’s business quality ultimately falls short of our standards. That said, the stock currently trades at 1.3× forward P/B (or $48.43 per share). This valuation multiple is fair, but we don’t have much faith in the company. We’re fairly confident there are better stocks to buy right now. We’d suggest looking at the Amazon and PayPal of Latin America.
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