Old Second Bancorp, Inc. (OSBC - Free Report) has grown organically and inorganically over the years on the back of its strong capital position. Improving credit quality is another positive factor. Further, the bank’s cost-control initiatives are impressive.
Given the strong fundamentals, shares of Old Second Bancorp have gained 3.6% year to date, versus the industry’s decline of 6.7%.
Also, the Zacks Consensus Estimate for its current-year earnings have been revised 7.1% upward, over the past 60 days. As a result, the stock carries a Zacks Rank #2 (Buy).
Key Driving Forces
Solid Inorganic Growth Strategies: Old Second Bancorp’s capital strength has been helping it to grow inorganically. As part of this strategy, the company acquired the Chicago branch of Talmer Bank and Trust in October 2016. The deal helped the bank expand its presence in Chicago and raised its loans and deposit balances.
Prudent Expense Management: The Aurora, IL-based lender has been successful in reducing expenses at a compound annual growth rate of 7.1% over the last four years (ended 2016), with the help of branch closures and staff reductions. Such cost management initiatives will support the bank’s bottom-line growth.
Improved Credit Quality: Old Second Bancorp’s credit quality has improved significantly over the years. In 2016, net-charge offs and non-performing assets declined nearly 71% and 66%, respectively from the 2013 levels.
Earnings per Share Growth: Old Second Bancorp has recorded a solid earnings growth rate of 50% over the last three to five years compared with 11.5% for industry it belongs to.
Further, this earnings momentum is likely to continue in the long term (three to five years) as reflected by the company’s projected earnings per share growth rate of 41.5%, compared with 9.9% for the industry.
Favorable VGM Score: Old Second Bancorp has a VGM Score of B. Our research shows stocks with a VGM Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Stock Looks Undervalued: The stock currently has a Value Score of B. Also, it looks undervalued with respect to its price-to-book and price-to-sales ratios. The company’s trailing 12-month P/B and P/S ratio of 1.78 and 3.12 respectively, is below the industry average of 2.35 and 5.16.
Other Stocks to Consider
Some other stocks in the same space worth considering are The PNC Financial Services Group, Inc. (PNC - Free Report) , State Street Corporation (STT - Free Report) and Washington Federal, Inc. (WAFD - Free Report) . All these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
PNC Financial’s Zacks Consensus Estimate for current-year earnings was revised 1.9% upward for 2017, in the past 60 days. Also, its share price has increased 41.5% in the past 12 months.
State Street’s current-year earnings estimates were revised 3.7% upward, over the past 60 days. Further, the company’s shares have jumped 32.4% in a year.
Washington Federal’s Zacks Consensus Estimate for current-year earnings was revised nearly 1% upward, over the last 60 days. Moreover, in the past year, its shares have gained 18.8%.
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