Amid global headwinds, investors have been shying away from investing in the banking sector. However, there are many banks with a decent performance history and strong fundamentals, signaling a profitable investment opportunity. Hence, it is not advisable to ignore the sector totally.
Western Alliance Bancorporation (WAL - Snapshot Report) is one such bank that continues to reflect strength in several areas. Thus, adding the stock to your investment portfolio should not be disappointing. With a market capitalization of over $3.9 billion, the company provides several banking products and related services primarily in Arizona, California, and Nevada.
Notably, the stock of this Phoenix, AZ -based company has gained more than 18% over the last one year.
Why is Western Alliance a Solid Pick?
Earnings Strength: Western Alliance has recorded earnings growth rate of 29.3% over a period of three to five years, compared with the industry average of 6.9%. Continuing with the earnings momentum, the earnings growth rate for the current year is expected to be 24.7%.
Further, the company’s long-term (3–5 years) estimated earnings growth rate of 11.3% promises rewards for investors in the long run.
Revenue Growth: Organic growth remains strong at Western Alliance. Revenues grew at a CAGR of 10.1% over the last three years (2013–2015). Further, the top line is expected to surge 37.4% in 2016.
Superior Return on Equity: Western Alliance has a return on equity of 13.15% compared with the industry average of 9.21%. This indicates that the company reinvests more efficiently compared with its peers.
Stock Looks Undervalued: Western Alliance stock looks undervalued with respect to its Price-to-Earnings (P/E) and PEG ratios. It has a P/E ratio of 14.76, compared with the industry average of 16.11. Also, the company’s PEG ratio of 1.30 is below the industry average of 1.60.
Upward Estimate Revisions: Over the past 60 days, the Zacks Consensus Estimate has inched up by a penny to $2.53, for 2016. Backed by these upward estimate revisions, the company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Other Stocks to Consider
If you are interested in other West banks, you may consider BofI Holding, Inc. (BOFI - Snapshot Report) , Bank of Hawaii Corporation (BOH - Snapshot Report) and Central Pacific Financial Corp. (CPF - Snapshot Report) as well.
Currently holding a Zacks Rank #2, BofI Holding’s earnings for the current year are expected to grow at an impressive 16.4% rate. Also, the stock has gained more than 6% so far this year.
The Zacks Rank #2 stock, Bank of Hawaii’s earnings for 2016 are expected to grow at the rate of 11.4%. Further, year to date, shares of the company have gained nearly 16%.
Central Pacific Financial’s shares have gained 14.9% so far this year. In addition, earnings for this Zacks Rank #2 stock are expected to grow at a rate of 6.8% in 2016.
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