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6 Reasons to Invest in Hilltop Holdings (HTH) Stock Now

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Despite the continued uncertainties related to the pandemic, Hilltop Holdings Inc. (HTH - Free Report) looks like a good investment option right now, based on its fundamental strength. The company remains well-poised for top-line growth, supported by decent loan growth along with its increased focus on improving fee income.

Of late, earnings estimates for the company have been witnessing upward revisions, reflecting analysts’ optimism regarding its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for Hilltop Holdings’ 2020 earnings has been revised 25.7% upward. Thus, the company currently sports a Zacks Rank #1 (Strong Buy).

Its price performance also seems impressive. The stock has gained 50.4% over the past three months compared with the industry’s growth of 28.9%.

Mentioned below are some other aspects that make Hilltop Holdings a solid pick right now.

Earnings Growth: In the last three-five years, the company’s earnings witnessed growth of 7.8%. The uptrend is expected to continue in the near term as reflected by its projected earnings per share (EPS) growth rate of 14.3% for 2020.

Also, the company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters, the average beat being 61.1%.

Revenue Strength: Supported by continued growth in loans, the company’s net interest income (NII) witnessed a CAGR of 4.1% over the last six years (2014-2019). In the first half of 2020, NII remained relatively stable. The top line is expected to continue to grow in the near term, as can be seen from its projected sales growth rate of 2.5% for 2020.

Inorganic Growth Strategy: Hilltop Holdings has grown significantly through acquisitions. Since the buyout of PlainsCapital in 2012, the company’s business has expanded tremendously with the consolidation of its position in Texas, Oklahoma, Georgia, Tennessee and Arizona. These deals are not only accretive to earnings but have also helped the company to 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.

Superior Return on Equity (ROE): The company currently has an ROE of 12.59%, higher than the industry average of 8.19%. This reflects that it is more efficient than peers in using shareholder funds.

Reasonable Valuation: Hilltop Holdings’ stock looks undervalued right now, with respect to its price-to-earnings and price-to-sales ratios. It has a P/E (F1) ratio of 7.71, lower than the industry average of 12.69. Additionally, the company’s P/S ratio of 0.98 is below the industry average of 1.91.

Other Key Picks

A few other top-ranked stocks from the finance space are mentioned below.

ETRADE Financial Corporation witnessed an upward earnings estimate revision of 13% for the current year over the past 60 days. Its share price has risen 34.9% over the past year. It currently carries a Zacks Rank #2 (Buy).

The Zacks Consensus Estimate for TD Ameritrade Holding Corporation’s current fiscal year earnings has been revised 21% upward over the past 60 days. Its share price has declined 12.7% over the past 12 months. The company currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nomura Holdings, Inc. (NMR - Free Report) witnessed an upward earnings estimate revision of 55.8% for the current fiscal year over the past 60 days. Its share price has risen 49.9% over the past year. It currently carries a Zacks Rank #2.

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