KeyCorp has been treading water for the past six months, recording a small return of 1.9% while holding steady at $18.30.
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Why Is KeyCorp Not Exciting?
We're sitting this one out for now. Here are three reasons why KEY 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.
KeyCorp’s net interest income has grown at a 2.4% annualized rate over the last five years, much worse than the broader banking industry. This was driven by its loan growth as its net interest margin, which represents how much a bank earns in relation to its outstanding loan book, declined throughout that period.
3. EPS Trending Down
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.
Sadly for KeyCorp, its EPS declined by 13.5% annually over the last five years, more than its revenue. This tells us the company struggled because its fixed cost base made it difficult to adjust to shrinking demand.
Final Judgment
KeyCorp’s business quality ultimately falls short of our standards. That said, the stock currently trades at 1.2× forward P/B (or $18.30 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
Stocks We Would Buy Instead of KeyCorp
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