Despite the coronavirus outbreak-induced economic uncertainty, Old Second Bancorp, Inc. (OSBC - Free Report) stock looks like a good investment option now, given its strong fundamentals and promising prospects.
The Zacks Consensus Estimate for the company’s current-year earnings has been revised 5.8% upward over the past 30 days, reflecting that analysts are optimistic regarding its earnings growth potential. It currently carries a Zacks Rank #2 (Buy).
Over the past three months, shares of Old Second Bancorp have gained 9% compared with the industry’s growth of 8.3%.
There are some other factors mentioned below that make Old Second Bancorp an attractive investment option now.
Earnings Strength: Over the last three to five years, the company witnessed earnings growth of 35.12%, higher than the industry average of 14%. While earnings are expected to decline 57.7% in 2020 due to the current economic slowdown and a tough operating backdrop, the same is projected to grow 27.2% in 2021.
Moreover, the company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three and matched in one of the trailing four quarters.
Revenue Growth: Old Second Bancorp’s revenues witnessed a CAGR of 9.3% over the last six years (2014-2019). The uptrend in revenues is expected to continue in the near term. While the top line is projected to decline 7.3% in 2020, the same will witness marginal growth in 2021.
Strong Leverage: Old Second Bancorp’s debt/equity ratio is 0.36, marginally lower than the industry’s average debt/equity ratio of 0.37. This reflects that the company will be financially stable even during adverse economic situations.
Superior Return on Equity (ROE): Old Second Bancorp’s ROE of 14.41% compares favorably with the industry average of 10.14%. This highlights the company’s commendable position over its peers in using shareholders’ funds.
Favorable Valuation: With respect to the price/book (P/B) ratio as well as the price/cash flow (P/CF) ratio, the company seems undervalued right now. Its P/B ratio is 0.80, lower than the industry average of 0.83. Moreover, its P/CF ratio of 4.82 compares favorably with the industry average of 6.70.
Moreover, the stock currently 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 (Strong Buy) or 2, offer the best upside potential.
Other Key Picks
Raymond James Financial, Inc.’s (RJF - Free Report) earnings estimates for the current fiscal year have moved up 10% over the past 60 days. The company’s shares have gained 8.2% over the past three months. At present, it sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
LPL Financial Holdings Inc.’s (LPLA - Free Report) earnings estimates for the current year have moved 13.9% upward over the past 60 days. The stock has appreciated 40.5% over the past three months. The company currently carries a Zacks Rank #2.
GAIN Capital Holdings’ (GCAP - Free Report) earnings estimates for 2020 have been raised significantly over the past 60 days. The company’s shares have gained 7.9% over the past three months. At present, it has a Zacks Rank #2.
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