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6 Reasons Why East West Bancorp (EWBC) Stock is Worth Buying
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With the Federal Reserve expected to raise interest rates a number of times this year to control inflation, investors can bet on bank stocks right now. One such bank – East West Bancorp, Inc. (EWBC - Free Report) – looks like a promising investment option now.
The company remains on track for organic growth, supported by the rise in loans and deposit balances. Also, EWBC’s efficient capital deployments indicate a solid balance sheet and liquidity position.
Analysts seem to be optimistic regarding the company’s earnings growth potential. The Zacks Consensus Estimate for earnings has been revised 2.9% and 4.1% upward for 2022 and 2023, respectively, over the past 30 days. East West Bancorp currently carries a Zacks Rank #2 (Buy).
Similar to other companies in the banking industry, shares of East West Bancorp haven’t remained untouched by the current sell-off in the broader markets. The company’s shares have lost 10.9% so far this year compared with a 24.6% decline recorded by the industry. This makes an attractive entry point for investors.
Image Source: Zacks Investment Research
Here are some of the key factors that make the EWBC stock an attractive pick right now.
Earnings Growth: East West Bancorp witnessed earnings growth of 10.7% in the past three to five years. The upward momentum is likely to continue in the near term, as reflected by the company’s projected earnings growth rate of 14.9% for 2022 and 18.4% for 2023.
Further, its long-term (three to five years) estimated earnings growth rate of 10% promises rewards for investors.
Revenue Strength: The company’s organic growth trajectory looks impressive. While net interest income (NII) (the primary source of its revenues) declined in 2020, the same witnessed a CAGR of 5.8% over the last five years (2017-2021). Over the same period, total loans recorded a CAGR of 9.5%. The continued rise in demand for loans and an improving economy are expected to keep supporting NII in the upcoming quarters.
EWBC’s 2022 revenues are projected to grow 16.5%, whereas 2023 revenues will likely rise 16.6%.
Robust Balance Sheet: As of Mar 31, 2022, EWBC had total debt of $526.8 million, while cash and cash equivalents were $3.85 billion. It has investment-grade credit ratings of BBB from both Standard & Poor and Fitch Ratings. This renders the company favorable access to the debt markets. Thus, given a record of consistent earnings growth and sufficient liquidity, as well as a solid credit profile, the company is expected to be able to continue meeting debt obligations in the near term, even if the economic situation worsens.
Efficient Capital Deployments: East West Bancorp’s capital deployment activities seem impressive. This January, the company hiked its quarterly dividend by 21%. This followed a 20% hike in both January 2021 and April 2019, 15% in July 2018, and 11.1% in January 2015.
Also, the company has a share repurchase plan in place, under which it is authorized to buy back up to $500 million worth of shares. While EWBC hasn’t repurchased shares since the first quarter of 2020, its capital deployment plan looks sustainable, given a solid capital position and earnings strength.
Superior Return on Equity (ROE): East West Bancorp has an ROE of 15.90%, higher than the industry average of 12.26%. This shows that the company reinvests its cash more efficiently than its peers.
Strong Leverage: The company currently has a debt/equity ratio of 0.04 compared with the industry average of 0.13. This highlights that EWBC is better positioned than its peers. The company will be financially stable even in adverse economic conditions.
The Zacks Consensus Estimate for Comerica’s current-year earnings has been revised marginally upward over the past seven days. CMA’s shares have lost 12.6% in the year-to-date period.
Washington Federal recorded a 4.1% upward earnings estimate revision for fiscal 2022 over the past 30 days. The WAFD stock has lost 6.8% so far this year.
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6 Reasons Why East West Bancorp (EWBC) Stock is Worth Buying
With the Federal Reserve expected to raise interest rates a number of times this year to control inflation, investors can bet on bank stocks right now. One such bank – East West Bancorp, Inc. (EWBC - Free Report) – looks like a promising investment option now.
The company remains on track for organic growth, supported by the rise in loans and deposit balances. Also, EWBC’s efficient capital deployments indicate a solid balance sheet and liquidity position.
Analysts seem to be optimistic regarding the company’s earnings growth potential. The Zacks Consensus Estimate for earnings has been revised 2.9% and 4.1% upward for 2022 and 2023, respectively, over the past 30 days. East West Bancorp currently carries a Zacks Rank #2 (Buy).
Similar to other companies in the banking industry, shares of East West Bancorp haven’t remained untouched by the current sell-off in the broader markets. The company’s shares have lost 10.9% so far this year compared with a 24.6% decline recorded by the industry. This makes an attractive entry point for investors.
Image Source: Zacks Investment Research
Here are some of the key factors that make the EWBC stock an attractive pick right now.
Earnings Growth: East West Bancorp witnessed earnings growth of 10.7% in the past three to five years. The upward momentum is likely to continue in the near term, as reflected by the company’s projected earnings growth rate of 14.9% for 2022 and 18.4% for 2023.
Further, its long-term (three to five years) estimated earnings growth rate of 10% promises rewards for investors.
Revenue Strength: The company’s organic growth trajectory looks impressive. While net interest income (NII) (the primary source of its revenues) declined in 2020, the same witnessed a CAGR of 5.8% over the last five years (2017-2021). Over the same period, total loans recorded a CAGR of 9.5%. The continued rise in demand for loans and an improving economy are expected to keep supporting NII in the upcoming quarters.
EWBC’s 2022 revenues are projected to grow 16.5%, whereas 2023 revenues will likely rise 16.6%.
Robust Balance Sheet: As of Mar 31, 2022, EWBC had total debt of $526.8 million, while cash and cash equivalents were $3.85 billion. It has investment-grade credit ratings of BBB from both Standard & Poor and Fitch Ratings. This renders the company favorable access to the debt markets. Thus, given a record of consistent earnings growth and sufficient liquidity, as well as a solid credit profile, the company is expected to be able to continue meeting debt obligations in the near term, even if the economic situation worsens.
Efficient Capital Deployments: East West Bancorp’s capital deployment activities seem impressive. This January, the company hiked its quarterly dividend by 21%. This followed a 20% hike in both January 2021 and April 2019, 15% in July 2018, and 11.1% in January 2015.
Also, the company has a share repurchase plan in place, under which it is authorized to buy back up to $500 million worth of shares. While EWBC hasn’t repurchased shares since the first quarter of 2020, its capital deployment plan looks sustainable, given a solid capital position and earnings strength.
Superior Return on Equity (ROE): East West Bancorp has an ROE of 15.90%, higher than the industry average of 12.26%. This shows that the company reinvests its cash more efficiently than its peers.
Strong Leverage: The company currently has a debt/equity ratio of 0.04 compared with the industry average of 0.13. This highlights that EWBC is better positioned than its peers. The company will be financially stable even in adverse economic conditions.
Other Bank Stocks Worth a Look
A couple of other top-ranked bank stocks are Comerica (CMA - Free Report) and Washington Federal, Inc. (WAFD - Free Report) , carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
The Zacks Consensus Estimate for Comerica’s current-year earnings has been revised marginally upward over the past seven days. CMA’s shares have lost 12.6% in the year-to-date period.
Washington Federal recorded a 4.1% upward earnings estimate revision for fiscal 2022 over the past 30 days. The WAFD stock has lost 6.8% so far this year.