It seems to be a wise idea to add Northrim BanCorp, Inc. NRIM stock to your portfolio now amid the coronavirus pandemic, given the strength in the company’s fundamentals and solid prospects. Moreover, its steady capital-deployment activities reflect a strong balance-sheet position.
Further, analysts are bullish on the stock. Over the past 60 days, the Zacks Consensus Estimate for earnings moved 42.2% and 6.3% upward for 2020 and 2021, respectively. The company currently sports a Zacks Rank #1 (Strong Buy).
Shares of Northrim have gained 9% in the past three months as against the industry's 1.2% fall.
Factors That Make Northrim a Solid Pick
Earnings Growth: Over the past three to five years, Northrim has recorded earnings growth of 5.5%. This momentum is likely to continue in the near term, reflected by the projected earnings growth rate of 28.6% for 2020 (against the projection of a 19.9% decline for the industry).
Moreover, over the trailing four quarters, the company’s earnings surpassed the Zacks Consensus Estimate on three occasions and missed in the other, the average beat being 46.5%.
Revenue Strength: Northrim’s total revenues have witnessed a CAGR of 4.1% over the last three years (2017-2019). This uptick primarily resulted from the steady rise in total interest income. The company’s projected sales growth of 14.3% for 2020 (against the projection of no growth for the industry) highlight its revenue strength.
Solid Balance-Sheet Position: As of Jun 30, 2020, Northrim had total debt worth $22.1 million, lower than the cash & cash equivalents balance of $34.3 million. Moreover, the company’s current total debt to total capital of 9.6% is below the industry average of 37.3%. This highlights that the company carries a relatively lesser credit risk and chances of its default in debt payments are likely to be lower even if the economic situation worsens.
Steady Capital Deployment: Northrim’s capital-deployment activities are encouraging, with regular dividend hikes. Since 2005, the company has been increasing its dividend annually, with the latest one announced this August. Aided by a robust liquidity position, the capital deployments look sustainable and thus, the company is expected to keep enhancing shareholder value.
Stock Looks Undervalued: Northrim looks undervalued, with respect to price/earnings (P/E) (F1) and price/sales (P/S) ratios. It has a P/E ratio of 6.45, which is below the industry average of 9.93. Also, its P/S ratio of 1.38 is lower than the industry average of 1.95.
Superior ROE: Northrim’s trailing 12-month return on equity (ROE) highlights its growth potential. The company’s ROE of 11.30% compares favorably with the industry’s 9.28%, reflecting that it is more efficient in using shareholder funds than its peers.
Other Stocks to Consider
TD Ameritrade Holding Corporation AMTD has witnessed a marginal upward earnings estimate revision for the ongoing year in the past 30 days. Its shares have appreciated 15.3% over the past year. Currently, it sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Piper Sandler Companies PIPR witnessed an upward earnings estimate revision of 14.5% for the current year over the past 30 days. Its shares have gained 2.5% over the past year. It currently flaunts a Zacks Rank of 1.
CVB Financial Corp. CVBF witnessed a marginal upward estimate revision to $1.26 for 2020 earnings over the past 30 days. Its shares have declined 16.5% over the past year. At present, it carries a Zacks Rank of 2 (Buy).
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