Over the last six months, Dime Community Bancshares’s shares have sunk to $28.65, producing a disappointing 8% loss - a stark contrast to the S&P 500’s 5% gain. This was partly due to its softer quarterly results and might have investors contemplating their next move.

Is there a buying opportunity in Dime Community Bancshares, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free.

Why Is Dime Community Bancshares Not Exciting?

Even though the stock has become cheaper, we're sitting this one out for now. Here are three reasons why DCOM doesn't excite us and a stock we'd rather own.

1. Revenue Tumbling Downwards

Long-term growth is the most important, but within financials, a stretched historical view may miss recent interest rate changes and market returns. Dime Community Bancshares’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 10.2% over the last two years. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

2. Net Interest Margin Dropping

Revenue is a fine reference point for banks, but net interest income and margin are better indicators of business quality for banks because they’re balance sheet-driven businesses that leverage their assets to generate profits.

Over the past two years, Dime Community Bancshares’s net interest margin averaged 2.5%. Its margin also contracted by 51.7 basis points (100 basis points = 1 percentage point) over that period.

This decline was a headwind for its net interest income. While prevailing rates are a major determinant of net interest margin changes over time, the decline could mean Dime Community Bancshares either faced competition for loans and deposits or experienced a negative mix shift in its balance sheet composition.

3. EPS Took a Dip Over the Last Two Years

While long-term earnings trends give us the big picture, we also track EPS over a shorter period because it can provide insight into an emerging theme or development for the business.

Sadly for Dime Community Bancshares, its EPS declined by more than its revenue over the last two years, dropping 35%. This tells us the company struggled to adjust to shrinking demand.

Final Judgment

Dime Community Bancshares’s business quality ultimately falls short of our standards. After the recent drawdown, the stock trades at 0.9× forward P/B (or $28.65 per share). Beauty is in the eye of the beholder, but we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.

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