Home Bancshares currently trades at $29.22 per share and has shown little upside over the past six months, posting a middling return of 3.5%. The stock also fell short of the S&P 500’s 16% gain during that period.
Is now the time to buy Home Bancshares, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Home Bancshares Not Exciting?
We're swiping left on Home Bancshares for now. Here are three reasons we avoid HOMB and a stock we'd rather own.
1. Revenue Growth Flatlining
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. Home Bancshares’s recent performance shows its demand has slowed significantly as its revenue was flat 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 Home Bancshares’s net interest income to rise by 2.3%, close to its flat result for the past two years.
3. Projected Efficiency Ratio Falls Short
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.
Markets understand that a bank’s expense base depends on its revenue mix and what mostly drives share price performance is the change in this ratio, rather than its absolute value. It’s somewhat counterintuitive, but a lower efficiency ratio is better.
For the next 12 months, Wall Street expects Home Bancshares to maintain its trailing one-year ratio with a projection of 42.8%, an unexciting forecast given stock prices follow profits in rational markets.
Final Judgment
Home Bancshares isn’t a terrible business, but it isn’t one of our picks. With its shares underperforming the market lately, the stock trades at 1.4× forward P/B (or $29.22 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. We’d suggest looking at a dominant Aerospace business that has perfected its M&A strategy.
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