Carolina Financial Corp. – Value Analysis (NASDAQ:CARO) : August 23, 2017

Capitalcube gives Carolina Financial Corp. a score of 79.

Our analysis is based on comparing Carolina Financial Corp. with the following peers – Neffs Bancorp, Inc., National Bank Holdings Corporation Class A, Denmark Bancshares Inc and Mission Bancorp (NEFB-US, NBHC-US, DMKBA-US and MSBC-US).

Fundamental Overview

Carolina Financial Corp. has a fundamental score of 79 and has a relative valuation of OVERVALUED.

Fundamental Score

Company Overview

  • It currently trades at a Price/Book ratio of (1.90).
  • CARO-US‘s operating performance is relatively good compared to its peers. The market currently does not expect high earnings growth relative to its peers but seems to expect the company to maintain its relatively high rates of return.
  • CARO-US‘s median net profit margins and relatively high capital efficiency give it some operating leverage.
  • Change in the company’s annual revenues seems to be coming at the expense of earnings.
  • CARO-US‘s return on equity currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • While CARO-US‘s revenues in recent years have grown faster than the peer median, the market gives the stock a P/E ratio that is around peer median suggesting that the market has some questions about the company’s long-term strategy.
  • The company’s level of equity capital investment seems appropriate to support the company’s growth.

Drivers of Margin

  • Margins do not suggest any relative benefit from a pricing or an operating cost advantage.
  • The company’s net interest income (net interest income/total revenues) of 67.67% is around peer median suggesting that CARO-US‘s lending operations does not benefit from any differentiating pricing advantage. In addition, CARO-US‘s pre-tax margin of 38.00% is also around the peer median suggesting no operating cost advantage relative to peers.
  • The company’s comparatively healthy proportion of fee based income (i.e. non interest income/total revenues) of 32.33% versus peer median of 21.93% — suggests that CARO-US‘s operating margins are likely to be less volatile. In addition, CARO-US‘s proportion of overhead costs (i.e. non interest expense/total revenues) of 59.08x is around peer median — suggesting no cost advantage on fee-based overhead operations.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

Carolina Financial Corp. operates as a holding company. It provides commercial banking services to individuals and small-to medium-sized businesses. The company operates through the following segments: Community Banking, Wholesale Mortgage Banking, and Other. The Community Banking segment provides traditional banking services offered through CresCom Bank. The Mortgage Banking segment provides mortgage loan origination and servicing offered through Crescent Mortgage. The Other segment provides managerial and operational support to the other business segments through Carolina Services and Carolina Financial. It offers various deposit products including checking accounts, savings accounts, money market accounts, time deposits, certificates of deposit and commercial lending. The company was founded by John D. Russ in February 1997 and is headquartered in Wilmington, DE.