Western Alliance Bancorporation (WAL - Free Report) appears to be a solid bet now, given its organic growth strategies. Also, steady rise in earnings, and a strong capital and liquidity profile will likely support its profitability.
Further, analysts seem to be optimistic about the company’s prospects as the stock is witnessing upward estimate revisions. The Zacks Consensus Estimate for earnings has moved marginally upward over the past 30 days for both 2019 and 2020. Backed by positive estimate revisions and strong fundamentals, the company currently sports a Zacks Rank #1 (Strong Buy).
Also, the company’s price performance is impressive. Its shares have rallied 9.8% in the past three months, outperforming the industry’s rise of 1.8%.
What Makes Western Alliance Stock a Solid Pick
Earnings strength: Western Alliance has recorded an earnings growth rate of 25.2% over the past three to five years compared with the industry average of 14.7%. Continuing the momentum, the earnings growth rate is expected to be 14.7% and 7.1% for 2019 and 2020, respectively.
Further, the company’s long-term (three to five years) estimated earnings growth rate of 11.3% promises rewards for investors in the long run.
Further, the stock has a Growth Score of B. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 or 2 (Buy), offer the best upside potential.
Revenue growth: Western Alliance continues to make steady progress toward improving its top line. Its revenues recorded a five-year (ended 2018) CAGR of 25%. Also, the company’s loan and deposit balance remains strong. This, along with a favorable operating backdrop, will continue to support its financials.
The company’s projected consensus sales growth rate of 14.9% for 2019 and 8.6% for 2020 indicates continued upward momentum in revenues.
Robust capital deployment plan: Western Alliance has an impressive capital deployment plan in place. Earlier this month, the bank initiated regular quarterly dividends, effective third- quarter 2019. The company will be paying 25 cents per share quarterly dividend in August.
Further, it continues to return capital to shareholders through share repurchases. As of Jun 4, 2019, Western Alliance had $142.5 million remaining of its original $250 million buyback authorization. Given the strong balance sheet position and earnings strength, the bank will be able to sustain its capital deployment actions.
Superior Return on Equity: Western Alliance has a return on equity of 17.84% compared with the industry average of 11.80%. This indicates that the company reinvests more efficiently compared to its peers.
Strong leverage: The company’s debt/equity ratio is valued at 0.14 compared to the industry’s average of 0.18. The relatively strong financial health of the company will help it perform better in an unstable economic environment compared with its peers.
Stock looks undervalued: Western Alliance looks undervalued when compared with the broader industry. Its current price/earnings (F1) and PEG ratios are below the respective industry averages.
Also, the stock has a Value Score of A. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 or 2, offer the best upside potential.
Other Stocks Worth a Look
Glacier Bancorp, Inc. (GBCI - Free Report) has witnessed a marginal upward revision in its Zacks Consensus Estimate for 2019, over the past 60 days. Its shares have gained 6.9% over the past six months. Currently, the stock carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, Hilltop Holdings Inc.’s (HTH - Free Report) earnings estimates for the current year have been revised 10.7% upward. Over the past six months, shares of this Zacks Rank #2 company have rallied 21.8%.
Hancock Whitney Corporation (HWC - Free Report) has witnessed a marginal upward revision in its Zacks Consensus Estimate for 2019, over the past 60 days. Its shares have gained 18.1% over the past six months. Currently, the stock carries a Zacks Rank #2.
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