CCB

We rate COASTAL FINANCIAL CORP (CCB) as Avoid with a composite score of 36.5/100 at a current price of $78.90. The stock falls in the bottom quintile of our universe across key quantitative factors, and the multi-factor weakness suggests a high probability of continued underperformance.

The rating is primarily driven by strength in momentum (45th percentile) and value (43th percentile), which together account for the majority of the composite score. Offsetting weakness in stability (26th percentile) and quality (31th percentile) tempers our overall conviction. We assign a Narrow Moat rating (57/100), High uncertainty, and Poor capital allocation.

Key items to watch: balance sheet deleveraging progress. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

COASTAL FINANCIAL CORP holds a top-quartile position (#0 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 36.5/100 places it at rank #3961 in our full 7,333-stock universe. At $1.6B in market capitalization, COASTAL FINANCIAL CORP is a small-cap player in the Finance, Insurance, And Real Estate space, which limits certain scale advantages but may allow for more agile strategic execution.

Revenue is growing at 12%, though momentum at the 45th percentile suggests the market has not yet fully recognized this trajectory. This potential disconnect between fundamental improvement and market recognition could represent an opportunity for patient investors if the growth trend persists.

The margin cascade tells an important story: gross margins of 0% (-76.5pp vs sector) narrow to operating margins of 14% (-2.9pp vs sector) and net margins of 11.2%, yielding a gross-to-net conversion rate of N/A%. The significant margin erosion from gross to net suggests elevated operating expenses, high interest costs, or other structural drags that warrant monitoring.

At a current price of $78.90, COASTAL FINANCIAL CORP is trading near fair value based on current fundamentals. Our value factor score of 43/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at a P/E of 26.5x (a 122% premium to the sector median of 11.9x), EV/EBITDA of 20.9x (at a premium), P/B of 2.7x, P/S of 3.0x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to COASTAL FINANCIAL CORP. Key risk factors include significant leverage (858% debt-to-equity), below-average price stability (26th percentile), weak quality scores (31th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (858% debt-to-equity); below-average price stability (26th percentile); weak quality scores (31th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 26th percentile and quality factor at the 31th percentile provide a quantitative summary of the overall risk landscape.

We identify limited risk mitigants at this time, which contributes to our high uncertainty assessment. Investors should monitor for improvement in balance sheet metrics, margin stability, and business predictability that could warrant a downgrade in our risk assessment over time.

We rate COASTAL FINANCIAL CORP's capital allocation as Poor. Key concerns include elevated leverage (858% D/E), weak asset returns (ROA 1.1%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — COASTAL FINANCIAL CORP significantly underperforms these benchmarks, raising questions about management's ability to create shareholder value.

Investors should scrutinize management's reinvestment decisions and balance sheet trajectory before committing capital. Poor capital allocation often compounds over time: overlevered balance sheets limit strategic flexibility, while low returns on capital destroy shareholder value. We would need to see sustained improvement in profitability metrics and balance sheet discipline before considering an upgrade.

In summary, COASTAL FINANCIAL CORP receives a Avoid rating with a composite score of 36.5/100 (rank #3961 of 7,333). Our quantitative framework assigns a Narrow Moat (57/100, trend: stable), High uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 37/100.

Our analysis does not support a constructive view on COASTAL FINANCIAL CORP at this time. The combination of the current quantitative profile, high uncertainty, and poor capital allocation suggests unfavorable risk-reward at current levels. We recommend investors avoid new positions and existing holders consider reducing exposure.