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Is Texas Capital Bancshares (TCBI) a Good Value Investor Pick?
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Texas Capital Bancshares, Inc. (TCBI - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Texas Capital Bancshares has a trailing twelve months PE ratio of 10.11, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 17.44. If we focus on the long-term PE trend, Texas Capital Bancshares’ current PE level puts it below its midpoint of 19.31 over the past five years, with the number having risen rapidly over the past few months. However, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
However, the stock’s PE also compares favorably with the Zacks Finance Market sector’s trailing twelve months PE ratio, which stands at 13.95. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Texas Capital Bancshares has a forward PE ratio (price relative to this year’s earnings) of 9.31, so it is fair to say that a slightly more value-oriented path may be ahead for Texas Capital Bancshares’s stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Texas Capital Bancshares has a P/S ratio of about 2.31. This is lower than the S&P 500 average, which comes in at 3.13 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Texas Capital Bancshares currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Texas Capital Bancshares a solid choice for value investors.
For example, the PEG ratio for Texas Capital Bancshares is just 0.90, a level that is lower than the industry average of 1.6. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 9.07, which is better than the industry average of 11.65. Clearly, TCBI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Texas Capital Bancshares might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of C and Momentum Score of B. This gives TCBI a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed, at the best. The current year has seen 11 upward revisions compared to none downward in the past sixty days, while the next year estimate has seen five upward revisions compared to six downward revisions in the same time period.
As a result, the current year consensus estimate increased 2.54% in the past two months, whereas the next year estimate decreased 0.15%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Texas Capital Bancshares, Inc. Price and Consensus
Owing to such mixed estimate trends, the stock has a Zacks Rank #3 (Hold), which is why we are looking for in-line performance from the company in the near term.
Bottom Line
Texas Capital Bancshares is an inspired choice for value investors, given its decent metrics. Though the stock carries a Zacks Rank #3, it flaunts a robust industry rank (among the top 37% out of more than 250 Zacks Industries), which should boost investor confidence.
However, with a Zacks Rank #3 it is hard to get too excited about this company overall. In fact, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
Is Texas Capital Bancshares (TCBI) a Good Value Investor Pick?
Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Texas Capital Bancshares, Inc. (TCBI - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Texas Capital Bancshares has a trailing twelve months PE ratio of 10.11, as you can see in the chart below:
This level actually compares favorably with the market at large, as the PE for the S&P 500 stands at about 17.44. If we focus on the long-term PE trend, Texas Capital Bancshares’ current PE level puts it below its midpoint of 19.31 over the past five years, with the number having risen rapidly over the past few months. However, the current level stands well below the highs for the stock, suggesting that it can be a solid entry point.
However, the stock’s PE also compares favorably with the Zacks Finance Market sector’s trailing twelve months PE ratio, which stands at 13.95. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.
We should also point out that Texas Capital Bancshares has a forward PE ratio (price relative to this year’s earnings) of 9.31, so it is fair to say that a slightly more value-oriented path may be ahead for Texas Capital Bancshares’s stock in the near term too.
P/S Ratio
Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.
Right now, Texas Capital Bancshares has a P/S ratio of about 2.31. This is lower than the S&P 500 average, which comes in at 3.13 right now. Also, as we can see in the chart below, this is well below the highs for this stock in particular over the past few years.
Broad Value Outlook
In aggregate, Texas Capital Bancshares currently has a Value Score of A, putting it into the top 20% of all stocks we cover from this look. This makes Texas Capital Bancshares a solid choice for value investors.
For example, the PEG ratio for Texas Capital Bancshares is just 0.90, a level that is lower than the industry average of 1.6. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Additionally, its P/CF ratio (another great indicator of value) comes in at 9.07, which is better than the industry average of 11.65. Clearly, TCBI is a solid choice on the value front from multiple angles.
What About the Stock Overall?
Though Texas Capital Bancshares might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth Score of C and Momentum Score of B. This gives TCBI a Zacks VGM score — or its overarching fundamental grade — of B. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been mixed, at the best. The current year has seen 11 upward revisions compared to none downward in the past sixty days, while the next year estimate has seen five upward revisions compared to six downward revisions in the same time period.
As a result, the current year consensus estimate increased 2.54% in the past two months, whereas the next year estimate decreased 0.15%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Texas Capital Bancshares, Inc. Price and Consensus
Texas Capital Bancshares, Inc. price-consensus-chart | Texas Capital Bancshares, Inc. Quote
Owing to such mixed estimate trends, the stock has a Zacks Rank #3 (Hold), which is why we are looking for in-line performance from the company in the near term.
Bottom Line
Texas Capital Bancshares is an inspired choice for value investors, given its decent metrics. Though the stock carries a Zacks Rank #3, it flaunts a robust industry rank (among the top 37% out of more than 250 Zacks Industries), which should boost investor confidence.
However, with a Zacks Rank #3 it is hard to get too excited about this company overall. In fact, over the past two years, the broader industry has clearly underperformed the market at large, as you can see below:
So, value investors might want to wait for estimates and analyst sentiment to turn around in this name first, but once that happens, this stock could be a compelling pick.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>