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5 Reasons Why Washington Federal (WAFD) Stock is a Solid Pick
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Driven by the rising rate environment and decent loan demand, investors can bet on bank stocks. One such bank – Washington Federal, Inc. (WAFD - Free Report) – is worth considering at present.
The company remains on track for organic growth, supported by the rise in loans and deposit balances. Also, WAFD’s efficient capital deployments indicate a solid balance sheet and liquidity position.
The Zacks Consensus Estimate for earnings has been unchanged for both fiscal 2022 and fiscal 2023 over the past 30 days. Washington Federal currently carries a Zacks Rank #2 (Buy).
Similar to other players in the banking industry, shares of WAFD haven’t remained untouched by the recent sell-off in the broader markets. The company’s shares have lost 3.1% in the past three months compared with a 5.3% decline recorded by the industry. This makes an attractive entry point for investors.
Image Source: Zacks Investment Research
Let’s check the company fundamentals in detail before taking any investment decision.
Earnings Growth: Over the past three to five years, Washington Federal witnessed earnings growth of 2.9%. The company’s earnings are expected to display an upswing in the near term as its projected earnings growth is 34.7% for fiscal 2022 and 11.2% for fiscal 2023.
Additionally, WAFD has an impressive earnings surprise history. It pulled off an earnings surprise of 7.74 % in three of the trailing four quarters.
Revenue Strength: Washington Federal continues to make steady progress toward improving its top line. The company’s revenues witnessed a CAGR of 3.5% over the last six fiscal years (2016-2021). The upswing was largely driven by improving net loan balances, which saw a CAGR of 6.9% over the same time frame.
Both metrics reported an uptrend in the first nine months of fiscal 2022. Given the robust loan demand and decent economic growth, the company’s top line is expected to improve in the quarters ahead.
WAFD’s fiscal 2022 revenues are projected to grow 13%, whereas fiscal 2023 revenues will likely rise 10.5%.
Solid Balance Sheet: As of Jun 30, 2022, Washington Federal had total debt worth $1.73 billion and cash and cash equivalents worth $607.4 million. Yet, its times interest earned ratio of 10.0 at the end of third-quarter fiscal 2022 reflects a sequential improvement. Given the decent earnings strength, the company is expected to continue meeting debt obligations in the near term, even if the economic situation worsens.
Steady Capital Deployment: Washington Federal’s strong balance-sheet position has enabled it to increase dividends every year since 2011 (the last one was announced in January 2022). In addition, the company has its share-repurchase program in place. As of Jun 30, 2022, it had 3.73 million shares remaining under the buyback authorization. Driven by earnings strength and strong liquidity position, the company’s capital-deployment activities look sustainable.
Favorable Valuation: Washington Federal stock looks undervalued when compared with the broader industry. Its price/earnings (P/E) (F1) and price/book (P/B) ratios are below the respective industry averages. WAFD has a P/E (F1) ratio of 9.97 compared with the industry average of 10.03. Its P/B ratio stands at 1.11, below the industry’s 1.26.
So far this year, shares of East West Bancorp have lost 8.3%, while Bank OZK has declined 12.9%.
Over the past 30 days, the Zacks Consensus Estimate for East West Bancorp’s current-year earnings has remained unchanged, while the same for Bank OZK has moved almost 1% north.
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5 Reasons Why Washington Federal (WAFD) Stock is a Solid Pick
Driven by the rising rate environment and decent loan demand, investors can bet on bank stocks. One such bank – Washington Federal, Inc. (WAFD - Free Report) – is worth considering at present.
The company remains on track for organic growth, supported by the rise in loans and deposit balances. Also, WAFD’s efficient capital deployments indicate a solid balance sheet and liquidity position.
The Zacks Consensus Estimate for earnings has been unchanged for both fiscal 2022 and fiscal 2023 over the past 30 days. Washington Federal currently carries a Zacks Rank #2 (Buy).
Similar to other players in the banking industry, shares of WAFD haven’t remained untouched by the recent sell-off in the broader markets. The company’s shares have lost 3.1% in the past three months compared with a 5.3% decline recorded by the industry. This makes an attractive entry point for investors.
Image Source: Zacks Investment Research
Let’s check the company fundamentals in detail before taking any investment decision.
Earnings Growth: Over the past three to five years, Washington Federal witnessed earnings growth of 2.9%. The company’s earnings are expected to display an upswing in the near term as its projected earnings growth is 34.7% for fiscal 2022 and 11.2% for fiscal 2023.
Additionally, WAFD has an impressive earnings surprise history. It pulled off an earnings surprise of 7.74 % in three of the trailing four quarters.
Revenue Strength: Washington Federal continues to make steady progress toward improving its top line. The company’s revenues witnessed a CAGR of 3.5% over the last six fiscal years (2016-2021). The upswing was largely driven by improving net loan balances, which saw a CAGR of 6.9% over the same time frame.
Both metrics reported an uptrend in the first nine months of fiscal 2022. Given the robust loan demand and decent economic growth, the company’s top line is expected to improve in the quarters ahead.
WAFD’s fiscal 2022 revenues are projected to grow 13%, whereas fiscal 2023 revenues will likely rise 10.5%.
Solid Balance Sheet: As of Jun 30, 2022, Washington Federal had total debt worth $1.73 billion and cash and cash equivalents worth $607.4 million. Yet, its times interest earned ratio of 10.0 at the end of third-quarter fiscal 2022 reflects a sequential improvement. Given the decent earnings strength, the company is expected to continue meeting debt obligations in the near term, even if the economic situation worsens.
Steady Capital Deployment: Washington Federal’s strong balance-sheet position has enabled it to increase dividends every year since 2011 (the last one was announced in January 2022). In addition, the company has its share-repurchase program in place. As of Jun 30, 2022, it had 3.73 million shares remaining under the buyback authorization. Driven by earnings strength and strong liquidity position, the company’s capital-deployment activities look sustainable.
Favorable Valuation: Washington Federal stock looks undervalued when compared with the broader industry. Its price/earnings (P/E) (F1) and price/book (P/B) ratios are below the respective industry averages. WAFD has a P/E (F1) ratio of 9.97 compared with the industry average of 10.03. Its P/B ratio stands at 1.11, below the industry’s 1.26.
Other Bank Stocks Worth A Look
A couple of other top-ranked bank stocks are East West Bancorp (EWBC - Free Report) and Bank OZK (OZK - Free Report) , carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
So far this year, shares of East West Bancorp have lost 8.3%, while Bank OZK has declined 12.9%.
Over the past 30 days, the Zacks Consensus Estimate for East West Bancorp’s current-year earnings has remained unchanged, while the same for Bank OZK has moved almost 1% north.