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4 Reasons That Make Texas Capital (TCBI) Stock a Must Buy

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The Banking industry has been benefitting amid a stabilizing economy as well as higher interest rates. Further, the sector reported impressive performance in second-quarter 2018.

Texas Capital Bancshares, Inc. (TCBI - Free Report) is one such stock which reported a year-over-year increase in its second quarter earnings. It remains well poised to grow, driven by continued top-line growth, improving earnings performance, along with a strong balance-sheet position. Also, the company has an impressive capital-deployment plan.

A bullish trend in estimate revisions reflects optimism over the company’s earnings growth prospects. Over the last 60 days, the Zacks Consensus Estimate for 2018 and 2019 moved up 0.7% and 2.5%, respectively. As a result, the stock currently carries a Zacks Rank #2 (Buy).

Also, its shares have gained 22.9% over the past year, outperforming the industry’s rally of 15.7%.

What Makes the Stock a Solid Pick

Earnings Growth: Over the past three to five years, Texas Capital witnessed earnings per share growth of 11.3% compared with 8.8% increase for the industry. Notably, the company’s earnings are expected to display an upswing in the near term as its projected EPS growth is 50.1% for 2018 and 15.4% for 2019.

Further, the long-term expected EPS growth rate of 11.3% promises rewards for its shareholders.

Revenue Growth: Organic growth remains a key strength for Texas Capital. Net revenues witnessed a compound annual growth rate of 17.2%, over the last four years (2014-2017), with the trend continuing during the first six months of 2018 as well. 

The company’s projected sales growth of 19.3% for 2018 and 11.5% for 2019 indicates constant upward momentum in revenues.

Favorable Return on Equity (ROE): Texas Capital’s ROE of 12.51% indicates its superiority in terms of utilizing shareholders’ funds. The figure also compares favorably with the industry’s ROE of 9.51%.

Stock seems undervalued:
Texas Capital seems undervalued when compared with the broader industry. The current price-earnings (F1) ratio of 14.36 and PEG ratio of 1.27 are lower than the respective industry averages.

Other Key Picks

Some other similarly-ranked stocks in the same space are BancFirst Corp. (BANF - Free Report) , First Financial Bankshares (FFIN - Free Report) and BOK Financial Corp. (BOKF - Free Report) . All these stocks carry a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Over the last 60 days, the Zacks Consensus Estimate for BancFirst Corp’s current-year earnings has been revised 3.1% upward. Its share price has gained 26.7% in the past year.

First Financial Bankshares’ earnings estimates for 2018 have been revised 2.8% upward over the past 60 days. Its shares have surged 50.5% in a year’s time.

Over the last 60 days, BOK Financial Corp’s 2018 earnings estimate moved 2.2% north. Over the past year, its share price has appreciated 26.5%.

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