Despite the coronavirus outbreak-related chaos, it seems to be a wise idea to add Bank of Hawaii Corporation (BOH - Free Report) to your portfolio at the moment. The company’s strong fundamentals and prospects keep us encouraged. Also, strong balance sheet position keeps it well-poised for growth.
The Zacks Consensus Estimate for Bank of Hawaii’s earnings has been unchanged for 2020 over the past 30 days. The company currently carries a Zacks Rank #2 (Buy).
Its shares have lost 34.9% over the past six months compared with the industry’s decline of 25.4%.
Revenue Strength: Bank of Hawaii’s total revenues witnessed a CAGR of 4.1% over the last five years (2015-2019). The company’s projected sales growth of 1% for 2020 (against the projection of no growth for the industry) highlights its revenue strength.
Earnings Strength: Bank of Hawaii has witnessed 9.4% growth in earnings over the past three to five years. Also, the company has an impressive earnings surprise history. It outpaced the Zacks Consensus Estimate in three of the trailing four quarters, the average positive surprise being 9.6%. We believe that the company’s earnings might continue to grow in the quarters ahead on its solid growth efforts.
Solid Balance-Sheet Position: As of Mar 31, 2020, the company held total borrowings worth $713 million. The debt level has witnessed a fall over the past few quarters and also its current debt-capital ratio of 0.04 has declined. Further, as of the same date, the company held a strong cash position, with cash and cash equivalents of $556 million.
Furthermore, its earnings before interest and tax are 13.5 times the interest expenses and have remained almost stable in the past few quarters. Since the ratio indicates the company's ability to meet its debt obligations based on current income, we believe Bank of Hawaii carries low credit risk and a lesser likelihood of default of interest and debt repayments if the economic situation worsens.
Steady Capital Deployment: The company returns sufficient capital to its shareholders through dividends and share repurchases. In April 2019, it hiked its quarterly stock dividend by 4.8%. This reflects the company’s commitment to return value to its shareholders, backed by a strong capital position.
Superior Return on Equity: The company’s trailing 12-month return on equity (ROE) highlights its growth potential. Its ROE of 15.55% compares favorably with the industry’s 9.98%, underlining that it is more efficient in using shareholder funds than its peers.
Strong Leverage: Bank of Hawaii’s favorable debt/equity ratio compared with the industry average reflects its relatively strong financial health. Thus, we believe that it will perform better than peers in an unstable business environment.
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