East West Bancorp, Inc. (EWBC - Free Report) is well positioned for growth supported by continued rise in loans and deposit balances, as well as higher interest rates. Also, the company’s dividend payout policy seems impressive.
The company’s Zacks Consensus Estimate for the current-year earnings has been revised nearly 1% upward over the past 60 days, reflecting analysts’ optimism regarding its earnings growth potential. As a result, the stock currently carries a Zacks Rank #2 (Buy).
Further, its price performance seems impressive. The stock has rallied nearly 15% in the past three months.
Why the Stock is an Attractive Pick
Earnings growth: East West Bancorp witnessed earnings growth of 15.3% in the past three to five years. This momentum is likely to continue in the near term as reflected by the company’s projected earnings growth rate of 6% for 2019 and 6.8% for 2020.
Further, its long-term (three to five years) estimated EPS growth rate of 10.5% promises rewards for investors.
Also, the stock has a Growth Score of B. Our research shows that stocks with a Style Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 offer the best upside potential.
Revenue strength: Driven by improving rate environment and rising loan demand, East West Bancorp’s organic growth story looks impressive. Its revenues have witnessed a CAGR of 2.9% over the last five years (2014-2018). Also, it’s projected sales growth is7.3% and 7.2% for 2019 and 2020, respectively.
Strong leverage: East West Bancorp’s debt/equity ratio is 0.11 compared with the industry average of 0.23. The relatively strong financial health of the company will help it perform better than its peers in a dynamic business environment.
Superior Return on Equity (ROE): East West Bancorp has an ROE of 16.26%, higher than the industry average of 12.05%. This shows that the company reinvests its cash more efficiently.
Stock seems undervalued: East West Bancorp looks undervalued with respect to its Price-to-Earnings (P/E) and PEG ratios. The company has a P/E (F1) ratio of 10.23 compared with the industry average of 11.79. Also, the bank’s PEG ratio of 0.97 is below the industry average of 1.50.
In addition, East West Bancorp has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of ‘value traps’ and to identify stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Other Stocks Worth Considering
Other stocks in the banking space worth a look include Western Alliance Bancorporation (WAL - Free Report) , First Hawaiian, Inc. (FHB - Free Report) and Bank of Marin Bancorp (BMRC - Free Report) , each carrying a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Western Alliance’s earnings estimates for the current year have been revised 2.6% upward over the past 60 days. Also, its shares have gained 8.8% over the past three months.
First Hawaiian, Inc.’s earnings estimates for the current year have been revised 2.4% upward over the past 60 days. Over the past three months, its shares have rallied 10.5%.
Bank of Marin Bancorp’s earnings estimates for 2019 have moved up 3.6% over the past 60 days. Its share price has rallied 8.6% over the past three months.
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