The Zacks Industry Rank Highlights: Zions Bancorporation, Umpqua Holdings and Bofi Holding
Zacks Equity Research
Updated
For Immediate Release
Chicago, IL – January 30, 2017 - Stocks featured in this week's Zacks Industry Rank analysis include Zions Bancorporation (NASDAQ: ZION – Free Report ), Umpqua Holdings Corp. (NASDAQ: UMPQ – Free Report ) and Bofi Holding Inc. (NASDAQ:BOFI – Free Report ).
Zacks Industry Rank Analysis is written by John Blank, PhD, Chief Equity Strategist, Zacks.com.
Landing Bank Values Out West
The easiest spot to find a great industry is at the top of the Zacks list. That’s as easy as top-down analysis gets. But doing it that way also shows you an obvious defect.
You are not the first person to look into these stocks. In fishing terms, you are throwing your Bass Plug at the most obvious log, in the middle of the best lagoon. These spots are typically fished out.
Case in point: Banks-West is a 35-company strong Finance Sector industry. The Zacks Industry Ranks system currently pegs this industry group at #2 out of 265 industries (top 1%), while Finance is #1 out of 16 sectors in the Zacks ranks.
These small and mid-cap banks operate multiple business lines in one of the faster-growing regions of the country. Demographics stay supportive. Unemployment rates remain low today, keeping loan default rates down and deposits up.
Their latest quarterly EPS reports show investors. Money is indeed flowing into Western bank accounts and then out (profitably!) into these Western communities. EPS beats are consistent across this regional banking niche.
What’s not to like, right?
There is definitely something NOT to like!
The 1-year return for this attractive regional bank industry rose a whopping +52% over the last year. That scares me as a Value investor. When buying any smaller regional bank, valuation has always been a key to finding any remaining share price appreciation.
After a big industry-wide share price run (+52%), where do you find the value?
Below are three suggestions. All of my picks get a Zacks #2 Rank (BUY) rating. The Zacks #1 Rank (STRONG BUY) stocks looked too pricy to me.
I list these three Western banks by market capitalization, with the largest first.
(1) Zions Bancorporation (NASDAQ:ZION – Free Report ): This is a Zacks #2 Rank (BUY) stock with a VGM score of B, based on a Value score of B and a Growth score of C. The Momentum score is a nice A here. The forward P/E is 17.98 and the PEG ratio is 1.26. The market cap is $8.79 billion. The dividend is poor at 0.74%.
On Jan. 23rd, Zions Bancorp reported net earnings applicable to common shareholders for Q4 of $125.0 million, or $0.60 per diluted common share, compared to $116.9 million, or $0.57 per diluted common share, for Q3. This bank reports again on April 24th.
Q4 amounted to a +15% EPS surprise. The average of the last 4 EPS surprises has been +7.9%. 13 analysts cover this stock, so the company story here is well understood.
Zions Bancorporation is a multi-bank holding company headquartered in Salt Lake City, Utah. Zions focuses on maintaining community-minded banking by strengthening its core business lines of retail banking, small and medium-sized business lending, residential mortgage and investment activities.
(2) Umpqua Holdings Corp. (NASDAQ:UMPQ – Free Report ): This is a Zacks #2 Rank (BUY) stock with a VGM score of C, based on a Value score of A and a Growth score of F. The forward P/E is 15.41 and the PEG ratio is 1.81. The market cap is $4.05 billion. The dividend is currently offering a 3.48% annual return. That tasty income compensates for the weak Growth score.
On January 25th, the Portland, Oregon-based bank said it had earnings of 31 cents per share. The results surpassed Wall Street expectations. The average estimate of four analysts surveyed by Zacks was for earnings of 29 cents per share. The regional bank posted revenue of $323.3 million in the period. Its adjusted revenue of $306.4 million also exceeded Street forecasts. Four analysts surveyed by Zacks expected $288.6 million. This bank reports again on April 19th.
Umpqua Holdings Corp. is a financial holding company. Through its subsidiaries, the company engages primarily in the business of commercial and retail banking and the delivery of retail brokerage services.
(3) Bank of Internet – Bofi Holding Inc. (NASDAQ:BOFI – Free Report ): This is a Zacks #2 Rank (BUY) stock with a VGM score of A, based on a Value score of A and a Growth score of C. The forward P/E is 13,23 and the PEG ratio is 1.32. The market cap is $1.76 billion. There appears to be no dividend.
It reports again on Jan. 30th. Take a look at its Price and Consensus chart on Zacks.com . The steady climb of EPS revisions, year on year, is a thing of beauty. Projected EPS growth for next year is a strong +14%.
Bofi Holding is the holding company for Bank of Internet USA, a consumer-focused, nationwide savings bank operating primarily through the Internet from a single location in San Diego, California.
They provide a variety of consumer banking services, focusing primarily on gathering retail deposits over the Internet and originating and purchasing multifamily and single family loans for investment.
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