Given that the gradually stabilizing operating environment, Fed rate hikes and benefits of the tax overhaul position the banking industry well for growth, we think that it is a wise idea to add a few stocks from that industry to your portfolio now. Based on its underlying strength and good growth prospects, Popular, Inc. BPOP stock seems to be a solid bet now.
The company’s Zacks Consensus Estimate for current-year earnings has been revised 2.4% upward over the past 30 days, indicating analysts’ optimism about its earnings growth potential. As a result, the stock currently sports a Zacks Rank #1 (Strong Buy).
The company’s price performance also looks impressive. The stock has gained 32.4% so far this year, outperforming 9.3% growth recorded by the industry it belongs to. Moreover, Popular has a Momentum Score of A. Our research shows that stocks with a Style Score of ‘A’ or ‘B,’ when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
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Here are a few other factors that make the stock a viable investment option.
Earnings per Share (EPS) Growth: In the last three-five years, Popular witnessed EPS growth of 3.9%. This earnings momentum is likely to continue in the near term, as reflected by the company’s projected EPS growth of nearly 60% and 26.8% for 2018 and 2019, respectively.
Also, the company has a decent earnings surprise history. It surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters.
Revenue Strength: Popular’s revenues have witnessed a CAGR of 2% over the last four year (2014-2017). Moreover, the company projected sales growth of 12.7% for 2018 (higher than the industry average of 3.3%) ensures the continuation of the uptrend in revenues.
Strong Leverage: Popular’s debt/equity ratio, which stands at 0.00, indicates that the company uses no debt to finance its operations. On the other hand, the industry’s debt/equity ratio stands at 0.24. This reflects the company’s financial stability even in adverse economic conditions.
Stock Looks Undervalued: Popular stock looks undervalued with respect to its price-to-earnings (P/E) and price-to-book (P/B) ratios. It has a P/E (F1) ratio of nearly 11.0 compared with the industry average of 15.3. Moreover, the company’s P/B ratio of 0.9 is below the industry average of 1.5.
Other Stocks Worth a Look
A few other top-ranked stocks in the same space are Farmers Capital Bank Corporation FFKT, BancorpSouth Bank BXS and Capstar Financial Holdings, Inc. CSTR.
Farmers Capital has witnessed an upward earnings estimate revision of 5.8% for the current year over the past 60 days. Its share price has increased 38.2% in the past year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
BancorpSouth’s Zacks Consensus Estimate for the current year has been revised 3.7% upward in the past 60 days. Its shares have gained nearly 18% in the past 12 months. It currently carries a Zacks Rank #2.
Presently, Capstar Financial also carries a Zacks Rank #2. The stock has witnessed an upward earnings estimate revision of 1.8% for the current year over the past 60 days. Its share price has increased 9.8% in a year’s time.
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