Although Axos Financial (currently trading at $94.69 per share) has gained 5.8% over the last six months, it has trailed the S&P 500’s 11.8% return during that period. This might have investors contemplating their next move.
Given the relatively weaker price action, is now a good time to buy AX, or is it a pass? Find out in our full research report, it’s free.
Why Is AX a Good Business?
Originally founded as Bank of Internet USA in 1999 before rebranding in 2018, Axos Financial (NYSE: AX) is a diversified financial services company that provides digital banking, securities clearing, and investment advisory solutions to retail and business customers nationwide.
1. Net Interest Income Skyrockets, Fueling Growth Opportunities
Markets consistently prioritize net interest income over non-recurring fees, recognizing its superior quality compared to the more unpredictable revenue streams.
Axos Financial’s net interest income has grown at an 18.3% annualized rate over the last five years, much better than the broader banking industry and in line with its total revenue. 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. Elite Net Interest Margin Powers Best-In-Class Loan Book
The net interest margin (NIM) is a key profitability indicator that measures the difference between what a bank earns on its loans and what it pays on its deposits. This metric measures how efficiently it can generate income from its core lending activities.
Over the past two years, we can see that Axos Financial’s net interest margin averaged an elite 4.8%, indicating the company has a high-yielding loan book and a low cost of funds.
3. Outstanding Long-Term EPS Growth
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.
Axos Financial’s astounding 18.8% annual EPS growth over the last five years aligns with its revenue performance. This tells us its incremental sales were profitable.
Final Judgment
These are just a few reasons why we think Axos Financial is a great business. With its shares lagging the market recently, the stock trades at 1.5× forward P/B (or $94.69 per share). Is now the right time to buy? See for yourself in our comprehensive research report, it’s free.
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