COSO

We rate CoastalSouth Bancshares, Inc. (COSO) as a Hold with a composite score of 55.6/100 at a current price of $25.21. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in stability (81th percentile) and momentum (50th percentile), which together account for the majority of the composite score. Offsetting weakness in investment (29th percentile) and quality (48th percentile) tempers our overall conviction. We assign a No Moat rating (35/100), Medium 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.

CoastalSouth Bancshares, Inc. 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 55.6/100 places it at rank #1183 in our full 7,333-stock universe. At $261M in market capitalization, CoastalSouth Bancshares, Inc. 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 2%, though momentum at the 50th 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 65% (-11.5pp vs sector) narrow to operating margins of 1892% (+1875.4pp vs sector) and net margins of 1452.8%, yielding a gross-to-net conversion rate of 2235%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $25.21, CoastalSouth Bancshares, Inc. is trading near fair value based on current fundamentals. Our value factor score of 48/100 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 44.0x (a 268% premium to the sector median of 11.9x), EV/EBITDA of 8.6x (near the sector median), P/B of 1.2x, P/S of 162.5x. 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 Medium uncertainty rating to CoastalSouth Bancshares, Inc.. The stock presents a balanced risk profile: significant leverage (801% debt-to-equity) and low beta of 0.37 — while defensive, this may indicate limited upside participation in bull markets. While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: significant leverage (801% debt-to-equity); low beta of 0.37 — while defensive, this may indicate limited upside participation in bull markets; elevated valuation multiple (P/E 44.0x) that leaves limited margin for error. 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 81th percentile and quality factor at the 48th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 65% provide a buffer against cost pressures; above-average stability (81th percentile) suggests predictable business dynamics. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate CoastalSouth Bancshares, Inc.'s capital allocation as Poor. Key concerns include elevated leverage (801% D/E), weak asset returns (ROA 1.2%). Exemplary capital allocators generate ROE above 20% and maintain conservative leverage — CoastalSouth Bancshares, Inc. 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, CoastalSouth Bancshares, Inc. receives a Hold rating with a composite score of 55.6/100 (rank #1183 of 7,333). Our quantitative framework assigns a No Moat (35/100, trend: stable), Medium uncertainty, and Poor capital allocation. The average factor score across quality, value, momentum, stability, and investment is 51/100.

Our analysis supports a neutral stance on CoastalSouth Bancshares, Inc.. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.