With the economic and industry factors turning in favor of finance stocks, we have selected Texas Capital Bancshares TCBI for your consideration.
Its organic and inorganic growth strategies make it well poised for future endeavors. Further, its earnings growth prospects and efforts to enhance shareholder value are encouraging.
Supporting this positive view, the Zacks Consensus Estimate for current-year earnings has been revised slightly upward over the last 60 days. As a result, the stock carries a Zacks Rank #2 (Buy).
Shares of Texas Capital have gained 16.5% year to date, outperforming the industry’s rally of 6.1%.
Let’s take a look at the company’s underlying strength:
Revenue Growth: Organic growth remains Texas Capital’s key strength. Its revenues have witnessed a compounded annual growth rate (CAGR) of 12% over the last five years (2012-2016). Further, the top line is expected to grow 18.1% in 2017.
Impressive Balance Sheet Growth: The company’s loans and deposits have witnessed a CAGR of 18% and 23%, respectively, over a five-year period (ended 2016). This keeps Texas Capital well poised for any opportunistic acquisitions in the future.
Earnings per Share (EPS) Growth: Texas Capital has recorded an earnings growth rate of 3.4% over the last three to five years. Further, this earnings momentum is likely to continue in the long term (three to five years) as reflected by the company’s projected EPS growth rate of 12%.
Improving Cash Flow: Texas Capital has seen historical cash flow growth of 15.7% compared with 10.1% for the industry. The company’s current cash flow growth rate of 9.7% indicates its sound financial health.
Superior Return on Equity: Texas Capital has a return on equity of 10.4% compared with the industry average of 10.1%. This indicates that the company is efficient in utilizing shareholders’ funds.
Other Stocks to Consider
Some other stocks in the finance space worth considering are E*TRADE Financial Corporation ETFC, Morgan Stanley MS and Interactive Brokers Group, Inc. IBKR, all carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
E*TRADE’s consensus estimate for current-year earnings has been revised nearly 1% upward for 2017, in the past 60 days. Also, the company’s share price has rallied 42.9% year to date.
Morgan Stanley’s current-year earnings estimates have been moved slightly upward over the past 60 days. Further, the company’s shares have jumped 24.2% so far this year.
The Zacks Consensus Estimate for Interactive Brokers for the current year has been raised 3.2% upward over the last 60 days. Year to date, shares of the company have gained 64.8%.
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