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Spirit of Texas (STXB) Hits Fresh High: Is There Still Room to Run?

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Shares of Spirit of Texas Bancshares (STXB - Free Report) have been strong performers lately, with the stock up 13.7% over the past month. The stock hit a new 52-week high of $21 in the previous session. Spirit of Texas Bancshares has gained 20.6% since the start of the year compared to the 8.8% move for the Zacks Finance sector and the 23.2% return for the Zacks Banks - Southeast industry.

What's Driving the Outperformance?

The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on January 25, 2021, Spirit of Texas reported EPS of $0.72 versus consensus estimate of $0.45 while it beat the consensus revenue estimate by 16.07%.

For the current fiscal year, Spirit of Texas is expected to post earnings of $1.72 per share on $121.2 million in revenues. This represents a -4.97% change in EPS on a -2.89% change in revenues. For the next fiscal year, the company is expected to earn $1.75 per share on $124.7 million in revenues. This represents a year-over-year change of 1.45% and 2.89%, respectively.

Valuation Metrics

Spirit of Texas may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

Spirit of Texas has a Value Score of C. The stock's Growth and Momentum Scores are B and C, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 11.8X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 11.9X versus its peer group's average of 10.9X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Spirit of Texas currently has a Zacks Rank of #1 (Strong Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Spirit of Texas passes the test. Thus, it seems as though Spirit of Texas shares could have a bit more room to run in the near term.

How Does Spirit of Texas Stack Up to the Competition?

Shares of Spirit of Texas have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also solid potential picks, including South Plains Financial (SPFI - Free Report) , Hilltop Holdings (HTH - Free Report) , and Chemung Financial (CHMG - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.

The Zacks Industry Rank is in the top 2% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Spirit of Texas, even beyond its own solid fundamental situation.

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