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Is Argentina overheating? Grupo Financiero Galicia S.A. (GGAL - Snapshot Report) is expected to see triple digit earnings growth in 2011 as the Argentinean economy heats up. Shares, however, have fallen in the last few weeks, making this Zacks #1 Rank (strong buy) even more attractive.

Grupo Galicia is the holding company for Banco Galicia, one of Argentina's oldest banks, which provides financial services to corporations and individuals throughout Argentina. It also is a big supplier of credit cards.

Grupo Galicia Beat By 21% in Q1

On May 11, the company reported its first quarter results and surprised by 8 cents per share. Earnings per share were 46 cents compared to the consensus of 38 cents.

Net income soared 341% to Ps. 228 million from Ps. 51.7 million in the first quarter of 2010.

Average Shareholders Equity (ROE) is a telling indicator for banks. Gilicia's ROE in the first quarter jumped to 35% from 32% in the fourth quarter and was up from only 9.9% in the first quarter of 2010.

A ROE over 20 is usually considered attractive for a bank. By comparison, its Argentinean competitor, Banco Macro (BMA), had a first quarter ROE of 24.1% which is also considered solid but its not as good as Galicia's ROE.

Loans to the private sector rose 1.2% to 9.1% over the year ago period. Market share of private sector deposits also gained 0.4% to 8.4% year over year.

Analysts Raise 2011 and 2012 Estimates

Given a much better than expected quarter, the analysts raised both 2011 and 2012 estimates.

The 2011 Zacks Consensus jumped to $1.72 from $1.66 per share in the last 30 days as 1 estimate moved higher in that time.

That is earnings growth of 105% as the company earned just 84 cents per share in 2010.

For 2012, the growth is expected to continue. The 2012 Zacks Consensus climbed to $2.08 from $1.75 per share in the last 2 months, with 1 estimate also moving higher in the last 30 days.

That is further earnings growth of 21% in 2012.

Buying Opportunity?

Shares have fallen more than 23% in the last 6 months as emerging market stocks have taken it on the chin.

However, Goldman Sachs just upgraded its 2011 GDP target for Argentina to 7.7% from 6.8% after first quarter GDP was a much hotter than expected 9.9%.

Unfortunately, the hot growth is accompanied by high inflation, running, by most measures, over 20%.

Check out the 3-year chart. Shares had been on a tear until 2011.

Shares Are Cheap

With the recent pullback, Grupo Galicia has even more attractive fundamentals.

In addition to the stellar ROE, the company also has a price-to-book ratio of just 2.4. For banks, a P/B ratio under 4.0 is usually preferred.

With its double digit growth, the company has a PEG ratio of only 0.2. A PEG ratio under 1.0 usually indicates a company is undervalued.

Shareholders are rewarded with a dividend as well, but at just 0.2%, it's not the driving force behind owning the shares.

Argentina is the dark horse in Latin America's growth story as Brazil and Chile get all the glory. But Grupo Galicia has cheap fundamentals to go along with the growth.

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Turnaround Trader and Insider Trader services. You can follow her at twitter.com/traceyryniec.

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