Hilltop Holdings trades at $38.63 and has moved in lockstep with the market. Its shares have returned 12.2% over the last six months while the S&P 500 has gained 14%.
Is there a buying opportunity in Hilltop Holdings, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Do We Think Hilltop Holdings Will Underperform?
We don’t have much confidence in Hilltop Holdings. Here are three reasons why HTH doesn’t excite us, plus one 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.
Hilltop Holdings’s net interest income has grown at a 1.4% annualized rate over the last five years, much worse than the broader banking industry. Its growth was driven by an increase in its net interest margin, which represents how much a bank earns in relation to its outstanding loans, as its loan book shrank throughout that period.
2. Efficiency Ratio Expected to Falter
Topline growth alone doesn’t tell the complete story — the profitability of that growth shapes actual earnings impact. Banks track this dynamic through efficiency ratios, which compare non-interest expenses such as personnel, rent, IT, and marketing costs to total revenue streams.
Investors place greater emphasis on efficiency ratio movements than absolute values, understanding that expense structures reflect revenue mix variations. Lower ratios represent better operational performance since they show banks generating more revenue per dollar of expense.
For the next 12 months, Wall Street expects Hilltop Holdings to become less profitable as it anticipates an efficiency ratio of 84.4% compared to 54.1% over the past year.
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 Hilltop Holdings, its EPS declined by 13.8% 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
We see the value of companies driving economic growth, but in the case of Hilltop Holdings, we’re out. That said, the stock currently trades at 1× forward P/B (or $38.63 per share). This valuation tells us a lot of optimism is priced in - we think other companies feature superior fundamentals at the moment. We’d suggest looking at a safe-and-steady industrials business benefiting from an upgrade cycle.
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