What a brutal six months it’s been for Arbor Realty Trust. The stock has dropped 32.4% and now trades at $7.91, rattling many shareholders. This might have investors contemplating their next move.
Is now the time to buy Arbor Realty Trust, or should you be careful about including it in your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Arbor Realty Trust Will Underperform?
Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons why ABR 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.
Arbor Realty Trust’s net interest income has grown at a 6% annualized rate over the last five years, worse than the broader banking industry.
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Arbor Realty Trust’s weak 2.8% 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.
3. Declining TBVPS Reflects Erosion of Asset Value
Tangible book value per share (TBVPS) serves as a key indicator of a bank’s financial strength, representing the hard assets available to shareholders after removing intangible assets that could evaporate during financial distress.
Although Arbor Realty Trust’s TBVPS increased by 4.1% annually over the last five years, the past two years show the tide has turned as TBVPS declined at a -5.1% annual clip (from $12.69 to $11.42 per share).
Final Judgment
Arbor Realty Trust falls short of our quality standards. Following the recent decline, the stock trades at 0.7× forward P/B (or $7.91 per share). While this valuation is optically cheap, the potential downside is huge given its shaky fundamentals. There are better stocks to buy right now. Let us point you toward a fast-growing restaurant franchise with an A+ ranch dressing sauce.
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