Carolina Financial Corp. – Value Analysis (NASDAQ:CARO) : November 13, 2017

Capitalcube gives Carolina Financial Corp. a score of 89.

Our analysis is based on comparing Carolina Financial Corp. with the following peers – Citizens First Corporation, Citizens Bancorp of Virginia, Inc., Neffs Bancorp, Inc. and National Bank Holdings Corporation Class A (CZFC-US, CZBT-US, NEFB-US and NBHC-US).

Fundamental Overview

Carolina Financial Corp. has a fundamental score of 89 and has a relative valuation of OVERVALUED.

Fundamental Score

Company Overview

  • It currently trades at a Price/Book ratio of (2.58).
  • CARO-US outperforms its peers with a relatively high operating performance and the market also expects faster growth relative to its peers
  • CARO-US‘s median net profit margins and relatively high capital efficiency give it some operating leverage.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • CARO-US‘s return on equity currently and over the past five years suggest that its relatively high operating returns are sustainable.
  • Compared with the peers chosen, CARO-US has had faster revenue growth in prior years and a current P/E ratio that suggests faster growth in the future suggesting superior growth expectations.
  • 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 70.41% 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 39.42% 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 29.59% versus peer median of 21.21% — 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 57.56x 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.