Hilltop Holdings Inc. HTH is well-poised for top-line growth, supported by continued rise in demand for loans and increased focus on fee income. Moreover, the company’s efforts to expand through acquisitions are likely to support profitability. Hence, it seems to be a wise idea to add the stock to your portfolio now.
The company has been witnessing upward estimate revisions off late, reflecting analysts’ optimism regarding its earnings growth potential. Over the past 60 days, the Zacks Consensus Estimate for Hilltop Holdings’ 2019 earnings has been revised 13.5% upward. Thus, the company currently carries a Zacks Rank #2 (Buy).
Its price performance also seems impressive. The stock has gained 36.6% so far this year, outperforming the industry’s growth of 18.5%.
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Mentioned below are some other aspects that make Hilltop Holdings a solid pick right now.
Earnings Growth: The company’s earnings witnessed a decline of 1.3% in the last three-five years. Nevertheless, the trend is expected to reverse in the near term as reflected by its projected earnings per share (EPS) growth rate of more than 70% for 2019 (higher than the industry average of 3.7%).
Revenue Strength: Supported by continued loan growth and acquisitions, the company’s net interest income (NII) witnessed a CAGR of 4.8% over the last five years (2014-2018). The top line is expected to continue to grow in the near term, as can be seen from its projected sales growth rate of 10.1% for 2019.
Inorganic Growth Strategy: Hilltop Holdings has grown significantly through acquisitions. Since the buyout of PlainsCapital in 2012, the company’s business has expanded tremendously. Further, in 2018, it acquired The Bank of River Oaks, which will likely be accretive to its earnings. These deals helped the company diversify operations from core P&C insurance to a profitable banking operation.
Strong Leverage: Currently, Hilltop Holdings’ debt/equity ratio of 0.03 is below the industry’s 0.25. This shows that the company will be financially stable, even in adverse economic conditions.
Valuation Looks Reasonable: Hilltop Holdings’ stock looks undervalued right now, with respect to its price-to-book and price-to-sales ratios. It has a P/B ratio of 1.07, lower than the industry average of 1.17. Additionally, the company’s P/S ratio of 1.23 is below the industry average of 2.84.
Further, Hilltop Holdings has a Value Score of A. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Key Picks
A few other top-ranked stocks from the finance space are Moody's Corporation MCO, On Deck Capital, Inc ONDK and PRA Group, Inc PRAA. Each of these stocks currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Moody's has witnessed an upward earnings estimate revision of 1.7% for the current year over the past 60 days. Its share price has increased 2.8% over the past three months.
On Deck Capital has witnessed an upward earnings estimate revision of 12.1% for the current year over the past 60 days. Its share price has increased 21% over the past three months.
PRA Group’s Zacks Consensus Estimate for earnings for the current year has been revised 5.3% upward over the past 60 days. Its shares have gained 5.6% over the past three months.
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