Improving operating backdrop, rising rate environment and strengthening domestic economy are expected to continue supporting banking stocks. Keeping this in mind, we have selected Heritage Commerce Corp (HTBK - Free Report) for your consideration.
The company’s Zacks Consensus Estimate for the current-year earnings has been revised 1.3% upward over the last 60 days, indicating analysts’ optimism about its earnings growth potential. As a result, the stock currently carries a Zacks Rank #2 (Buy).
Given the positive estimate revisions and a solid Zacks Rank, we expect a decent upside for the stock in the near term. The stock has rallied 18.6% over the past six months, outperforming the industry’s growth of 13.4%.
What Might Drive the Stock Higher
Earnings Strength: Heritage Commerce recorded an earnings growth rate of 23.3% over the last three to five years compared with growth of 11.6% for the industry it belongs to. The company’s earnings growth rate for the current year is anticipated to be 11.6%.
Moreover, the long-term (three-five years) expected EPS growth of 10% promises rewards for its shareholders.
Revenue Growth: Heritage Commerce has been witnessing consistent improvement in revenues in the past few years. Revenues witnessed a compound annual growth rate of 25.8% over the last three years (2014-2016). Further, the top line is expected to increase 9.1% in 2017 compared with 2.8% growth for the industry.
Superior ROE: Heritage Commerce’s return on equity (ROE) supports its growth potential. Its ROE of 11.15% compares favorably with the industry average of 10.23%, implying that it is efficient in using shareholders’ funds.
Strong Leverage: Heritage Commerce’s debt/equity ratio is 0.14 compared with the industry average of 0.18. This shows that the company does not use debt to finance its operations. Hence, it will be financially stable even in adverse economic conditions.
Other Stocks to Consider
Some other top-ranked stocks in the same space are CoBiz Financial , FS Bancorp (FSBW - Free Report) and Bank of Commerce Holdings (BOCH - Free Report) .
CoBiz Financial has witnessed a positive earnings estimate revision of 6.6% for the current year over the last 60 days. Its share price has rallied 29.4% in the past 12 months. The company sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
FS Bancorp has seen the Zacks Consensus Estimate for current-year earnings being revised 2.4% upward over the last 60 days. The company’s share price has increased 60.3% in the past 12 months. The stock carries a Zacks Rank of 2.
Bank of Commerce has witnessed an upward earnings estimate revision of 9.5% for the current year over the last 60 days. Its share price has risen 33.7% in the past 12 months. The company is a Zacks #2 Ranked player.
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