National Australia Bank Ltd (ASX: NAB) shares have had a wild week. Yesterday saw this ASX 200 bank stock plunge more than 3% at one point, only to recover and finish 0.2% higher at $39.33 a share.
This morning, NAB stock pulled back again but has since retraced and is now trading 0.13% higher at $39.38 a share.
Even so, NAB shares have been a phenomenal investment in recent months and years. This banking stock is up a whopping 27.3% in 2024 to date and 35% over the past 12 months.
Yesterday's volatility in the NAB share price didn't come out of the blue, though. It was sparked by NAB's latest earnings report, covering the 12 months to 30 September 2024.
As we saw yesterday, it was a bit of a mixed bag for NAB. The bank reported a 2% drop in revenues to $20.65 billion and an 8.1% decline in cash earnings to $7.1 billion. That helped drive the bank's net profits down 6.1% to $6.96 billion.
Even so, NAB was able to deliver a 1.35% increase to its final dividend for 2024, which will come in at 85 cents per share, up from the 84 cents investors enjoyed this time last year. It's arguably likely that this facet of NAB's report yesterday helped save the bank from a more severe share price drop.
But let's talk about whether NAB shares are a buy following these results.
Are NAB shares a buy after dropping earnings?
So, full disclosure: I own NAB stock myself. I am not selling my NAB shares following these earnings results. But I am not buying them either, and I think doing so at current prices is a dangerous endeavour.
As is evident from this bank's full-year earnings report, NAB is not growing. In fact, it's clear that NAB, along with the other big ASX bank stocks, is currently in a bit of an earning funk. Profits are stagnant, at best, across the board, while costs are rising. This isn't new, either.
Yet despite NAB's business treading water across FY2024, its share price has risen explosively.
This is unsustainable, in my view. Legendary investor Benjamin Graham once famously stated, "In the short run, the market is a voting machine, but in the long run, it is a weighing machine."
It is clear that investors, for whatever reasons, are currently 'voting' NAB stock, along with the other ASX banks, higher. But, as Graham warns us, it's the 'weight' of NAB's actual financials that will ultimately drive this bank's shares over time.
As such, I believe it would be irresponsible to call NAB shares a buy right now. I could well be wrong, but the numbers don't lie. Until this bank returns to growing its profits and earnings at a sustainable clip, I won't be buying any more NAB shares.
