KeyCorp

(New York Stock Exchange)
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Bearish -65

3 Reasons to Sell KEY and 1 Stock to Buy Instead - StockStory

AI-generated analysis

πŸ“‰ KeyCorp shares have returned 9.5% over six months, matching the S&P 500's 9.3% gain but failing to outperform.

πŸ’° Net interest income growth of 3.4% annually over five years lags significantly behind the broader banking industry average.

πŸ“Š The bank's net interest margin averaged a weak 2.6% over the past two years, indicating poor loan book profitability.

πŸ“‰ Earnings per share declined by 1.5% annually over the last five years despite revenue growth of 1.9%.

πŸ’Έ KeyCorp must compensate for low margins by increasing loan originations rather than improving operational efficiency.

🏦 The stock trades at a reasonable 1.3x forward price-to-book valuation but faces significant downside risk due to fundamentals.

🚫 Analysts lack confidence in KeyCorp and recommend avoiding the stock in favor of other opportunities.

πŸ’‘ Experts suggest looking at entrenched endpoint security platforms as a superior alternative investment choice.

Risk Factors
  • KeyCorp's net interest income growth of 3.4% annually is much worse than the broader banking industry average, indicating weak demand.
  • A poor net interest margin of 2.6% over the last two years reveals that the bank must rely on increased loan originations to sustain returns.
  • Earnings per share declined by 1.5% annually over the last five years while revenue grew by 1.9%, showing the company became less profitable on a per-share basis as it expanded.
  • Analysts state that KeyCorp's shakier fundamentals present too much downside risk despite its reasonable valuation of 1.3x forward P/B.
Full Analysis
KeyCorp (KEY) is currently trading at $22.54, having delivered a 9.5% share price return over the last six months, which closely mirrors the S&P 500's 9.3% gain. Analysts express low confidence in the stock, citing three primary reasons to avoid it despite its reasonable valuation of 1.3 times forward book value. The first concern is soft demand reflected in KeyCorp's net interest income, which has grown at a sluggish 3.4% annualized rate over the past five years, significantly underperforming the broader banking industry. This growth relies on expanding loan volumes and margins rather than organic strength, indicating a lack of robust underlying business momentum. Secondly, KeyCorp's net interest margin averaged a poor 2.6% over the last two years, forcing the bank to compensate for weak per-loan profitability by aggressively originating new loans. This strategy has led to declining earnings per share, which fell 1.5% annually over five years even as revenue grew by 1.9%, signaling deteriorating operational efficiency and profitability on a per-share basis. Consequently, while the stock price is reasonable, analysts believe the company's shakier fundamentals present too much downside risk compared to other opportunities. The article concludes that there are more exciting stocks available for investment at the moment, specifically pointing toward entrenched endpoint security platforms as a preferred alternative.