Arbor Realty Trust’s stock price has taken a beating over the past six months, shedding 26.8% of its value and falling to $10.45 per share. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is there a buying opportunity in Arbor Realty Trust, 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 Do We Think Arbor Realty Trust Will Underperform?
Despite the more favorable entry price, we don't have much confidence in Arbor Realty Trust. Here are three reasons why you should be careful with ABR and a stock we'd rather own.
1. Revenue Tumbling Downwards
We at StockStory place the most emphasis on long-term growth, but within financials, a stretched historical view may miss recent interest rate changes, inflation readings, and industry trends. Arbor Realty Trust’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 4.8% over the last two years. 
2. 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 Arbor Realty Trust, its EPS declined by more than its revenue over the last two years, dropping 17.6%. This tells us the company struggled to adjust to shrinking demand.
3. Declining TBVPS Reflects Erosion of Asset Value
We consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation.
Although Arbor Realty Trust’s TBVPS increased by 8.4% annually over the last five years, the past two years show the tide has turned as TBVPS declined at a -2.3% annual clip (from $12.47 to $11.90 per share).
Final Judgment
Arbor Realty Trust doesn’t pass our quality test. After the recent drawdown, the stock trades at 0.9× forward P/B (or $10.45 per share). This valuation tells us it’s a bit of a market darling with a lot of good news priced in - we think there are better investment opportunities out there. Let us point you toward the Amazon and PayPal of Latin America.
Stocks We Would Buy Instead of Arbor Realty Trust
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