Despite the coronavirus outbreak-led chaos, it seems to be a wise idea to add Popular, Inc. BPOP to your portfolio at the moment. The factors that might drive the stock higher include impressive organic growth, strong fundamentals and capital strength.
The company has been successful in gaining analysts’ confidence. Its current-year earnings estimates have been revised 8.8% upward over the past 60 days. As a result, the company currently carries a Zacks Rank #2 (Buy).
Shares of Popular have declined 23.8% over the past six months compared with the industry’s fall of 20.3%.
Here are a few other factors that make the stock a viable investment option.
Earnings per Share (EPS) Growth: In the last three-five years, the company witnessed EPS growth of 16%. While earnings are expected to decline 39.1% in 2020 due to the current economic slowdown and a tough operating backdrop, the same is projected to grow 27% in 2021. We believe that the company’s earnings might continue to grow on its solid growth efforts.
Moreover, it has an impressive earnings surprise history. The company surpassed the Zacks Consensus Estimate for earnings in three of the trailing four quarters, the average beat being 7.9%.
Revenue Strength: Popular’s revenues have witnessed a CAGR of 7.5% over the past five years (2015-2019). Additionally, the upward trend is expected to continue in the near term, with support from loan growth and Popular’s efforts to grow fee income.
Impressive Balance Sheet Growth: The company’s loans and deposits witnessed a CAGR of 4.4% and 12.6%, respectively, over a five-year period (ended 2019). Also, both loan and deposit balances are likely to improve in the quarters ahead.
Strong Leverage: Popular’s debt/equity ratio, which stands at 0.00, indicates that the company uses no debt to finance its operations. Further, the industry’s debt/equity ratio stands at 0.24 currently. This reflects the company’s financial stability, even in adverse economic conditions.
Steady Capital-Deployment Activities: The company remains committed to enhancing shareholder value. Notably, in January 2020, it raised the quarterly common stock dividend by 33%. Also, a share buyback program of up to $500 million was announced as of the same date.
Superior Return on Equity (ROE): Popular has an ROE of 8.46%, which is higher than the industry’s ROE of 8.21%. This reflects that the company reinvests its cash more efficiently than its peers.
Reasonable Valuation: The stock looks undervalued right now when compared with its broader industry. It currently has a price-to-book ratio of 0.56, marginally lower than the industry average of 0.78. Also, its price-to-earnings (F1) ratio of 9.09 is below the industry’s 12.32.
Moreover, the stock has a Value Score of B. The Value Style Score condenses all valuation metrics into one actionable score, which helps investors steer clear of 'value traps' and identify stocks that are truly trading at a discount.
Other Stocks to Consider
ETRADE Financial Corporation ETFC witnessed an upward earnings estimate revision of 18.9% for the current year over the past 60 days. Its share price has increased 18.9% over the past three months. It currently carries a Zacks Rank #2.
The Zacks Consensus Estimate for TD Ameritrade Holding Corporation’s AMTD current fiscal-year earnings has been revised 21.7% upward over the past 60 days. Its share price has increased 2.7% over the past three months. The company currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
First Western Financial’s MYFW earnings estimates have moved significantly upward for 2020 in the past 60 days. Moreover, the Zacks #1 Ranked stock has gained 9% in the past three months.
5 Stocks Set to Double
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ETRADE Financial Corporation (ETFC): Free Stock Analysis Report
Popular, Inc. (BPOP): Free Stock Analysis Report
TD Ameritrade Holding Corporation (AMTD): Free Stock Analysis Report
First Western Financial, Inc. (MYFW): Free Stock Analysis Report
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