Given that the gradually stabilizing operating environment, Fed rate hikes and benefits of the tax overhaul position the banking industry well for growth, we think that it is a wise idea to add a few stocks from that industry to your portfolio now. Based on its underlying strength and good growth prospects, Popular, Inc. (BPOP - Free Report) stock seems to be a solid bet now.
The company’s Zacks Consensus Estimate for current-year earnings has been revised 2.4% upward over the past 30 days, indicating analysts’ optimism about its earnings growth potential. As a result, the stock currently sports a Zacks Rank #1 (Strong Buy).
The company’s price performance also looks impressive. The stock has gained 32.4% so far this year, outperforming 9.3% growth recorded by the industry it belongs to. Moreover, Popular has a Momentum Score of A. Our research shows that stocks with a Style Score of ‘A’ or ‘B,’ when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Here are a few other factors that make the stock a viable investment option.
Earnings per Share (EPS) Growth: In the last three-five years, Popular witnessed EPS growth of 3.9%. This earnings momentum is likely to continue in the near term, as reflected by the company’s projected EPS growth of nearly 60% and 26.8% for 2018 and 2019, respectively.
Also, the company has a decent earnings surprise history. It surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters.
Revenue Strength: Popular’s revenues have witnessed a CAGR of 2% over the last four year (2014-2017). Moreover, the company projected sales growth of 12.7% for 2018 (higher than the industry average of 3.3%) ensures the continuation of the uptrend in revenues.
Strong Leverage: Popular’s debt/equity ratio, which stands at 0.00, indicates that the company uses no debt to finance its operations. On the other hand, the industry’s debt/equity ratio stands at 0.24. This reflects the company’s financial stability even in adverse economic conditions.
Stock Looks Undervalued: Popular stock looks undervalued with respect to its price-to-earnings (P/E) and price-to-book (P/B) ratios. It has a P/E (F1) ratio of nearly 11.0 compared with the industry average of 15.3. Moreover, the company’s P/B ratio of 0.9 is below the industry average of 1.5.
Other Stocks Worth a Look
A few other top-ranked stocks in the same space are Farmers Capital Bank Corporation , BancorpSouth Bank (BXS - Free Report) and Capstar Financial Holdings, Inc. (CSTR - Free Report) .
Farmers Capital has witnessed an upward earnings estimate revision of 5.8% for the current year over the past 60 days. Its share price has increased 38.2% in the past year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
BancorpSouth’s Zacks Consensus Estimate for the current year has been revised 3.7% upward in the past 60 days. Its shares have gained nearly 18% in the past 12 months. It currently carries a Zacks Rank #2.
Presently, Capstar Financial also carries a Zacks Rank #2. The stock has witnessed an upward earnings estimate revision of 1.8% for the current year over the past 60 days. Its share price has increased 9.8% in a year’s time.
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