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Texas Capital (TCBI) Displays Organic Growth: Time To Hold?

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Texas Capital Bancshares Inc. (TCBI - Free Report) continues to grow organically, partly due to its balance-sheet strength. The company seems to be poised well for top-line growth, primarily driven by rise in net interest income. However, escalating expenses remains the key concern.

Texas Capital has been experiencing an increasing trend in revenues for quite some time. Revenues witnessed a compound annual growth rate (CAGR) of 17.2% over the last four years (2014-2017). This was primarily driven by net interest income and a decent growth in non-interest income. While better fee pricing supported non-interest income growth, an increase in average earning assets and rising rate environment in the last couple of years helped the company deliver the interest income growth.

Texas Capital focuses on leveraging local business and community ties in the five major metropolitan areas of Texas — Dallas, Houston, Fort Worth, Austin and San Antonio. For this, it hires skilled professionals who can bring clients to the company and create an above-average retention ratio.

This relationship-based model also helped Texas Capital increase its market share, leading to impressive growth in loan and deposit balances. A rise in loans and deposits is anticipated to provide liquidity, as well as boost its near-term prospects.

The company’s shares have gained 28.1% over the past year, outperforming the industry’s rally of 14.2%.



However, Texas Capital’s soaring expenses remain a major concern. Costs rose at a CAGR of 16.1% over the last five years (2013-2017), with the increasing trend continuing in first-half 2018.

Some better-ranked stocks in the same space are BancFirst Corporation (BANF - Free Report) , First Financial Bankshares (FFIN - Free Report) and BOK Financial Corporation (BOKF - Free Report) . All these stocks carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the last 60 days, the Zacks Consensus Estimate for BancFirst Corporation’s current-year earnings has been revised 3.1% upward. Its share price has increased 29.8% in the past year.

First Financial Bankshares’ earnings estimates for 2018 have been revised 2.8% upward over the past 60 days. Its shares have gained 51.4% in a year’s time.

Over the last 60 days, BOK Financial Corporation’s 2018 earnings estimate moved north, marginally. Over the past year, its share price has appreciated 25.2%.

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