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Here's Why Northrim (NRIM) Stock is Worth Betting on Now

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It seems to be a wise idea to add Northrim BanCorp, Inc. (NRIM - Free Report) stock to your portfolio now, given the strength in the company’s fundamentals and solid prospects. Moreover, strong balance-sheet position keeps it well poised for growth.

Further, analysts are bullish on the stock. Over the past 30 days, the Zacks Consensus Estimate for earnings has moved 21.4% and 7.1% upward for 2021 and 2022, respectively. The company currently carries a Zacks Rank #2 (Buy).

Shares of Northrim have gained 39.7% in the past six months compared with the industry's 49.4% growth.

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Factors That Make Northrim a Solid Pick

Earnings Growth: Over the last three to five years, Northrim recorded earnings growth of 17.5%. This momentum is likely to continue in the near term, reflected by the projected earnings growth rate of 2.2% for 2021.

Notably, over the trailing four quarters, the company’s earnings surpassed the Zacks Consensus Estimate on each occasion, the average beat being 84.31%.

Revenue Strength: Northrim’s total revenues witnessed a CAGR of 8.2% over the last five years (2016-2020). This uptick primarily resulted from the steady rise in total interest income. The top line is continued to rise on the back of increasing mortgage banking revenues due to low interest rates.

Solid Balance-Sheet Position: As of Mar 31, 2021, Northrim had total debt worth $25.1 million. Also, its debt/capital ratio of 0.1 has been declining. With cash & cash equivalents balance of $20.3 million, we feel the company currently carries a relatively lesser credit risk and chances of its default in debt payments are low, even if the economic situation worsens.

Stock Looks Undervalued: With respect to the price/book and price/earnings ratios, Northrim seems undervalued. It has a P/B ratio of 1.17 and a P/E (F1) ratio of 8.34, both falling below the respective industry averages of 1.3 and 13.28.

The stock has a Value Score of A. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount.

Favorable VGM Score: The company has a VGM Score of B. VGM Score helps to identify stocks with the most attractive value, best growth and the most promising momentum. Back-tested results show that stocks with a style score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best investment opportunities.

Strong Leverage: The company’s debt/equity ratio is valued at 0.11 compared with the industry average of 0.13, indicating a relatively lower debt burden. It highlights the financial stability of the company even in adverse economic conditions.

Superior ROE: Northrim’s trailing 12-month return on equity (ROE) highlights its growth potential. The company’s ROE of 20.14% compares favorably with the industry’s 10.3%, reflecting that it is more efficient in using shareholder funds than its peers.

Other Stocks to Consider

Western Alliance Bancorporation (WAL - Free Report) has witnessed a 19.7% upward estimate revision over the past 60 days. The company’s shares have rallied 71.1% so far this year. It sports a Zacks Rank #1 (Strong Buy) at present. You can see the complete list of today’s Zacks #1 Rank stocks here.

Bank of Hawaii Corporation’s (BOH - Free Report) shares have gained 17.1% so far this year. Further, the company’s earnings estimates for the ongoing year have moved 19.3% north in the past 60 days. It currently has a Zacks Rank of 2.

UMB Financial Corporation (UMBF - Free Report) has witnessed 26.2% upward estimates revision for the current-year over the past 30 days. Shares of this Zacks #2 Ranked stock have gained 41.7% so far this year.

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