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4 Reasons Why Carolina Financial is a Solid Pick Right Now

Zacks Equity Research

Carolina Financial Corporation CARO has been growing organically as well as inorganically backed by its strong capital position. In order to strengthen its presence in North Carolina, it is in the process of acquiring First South Bancorp, Inc. FSBK. This acquisition is expected to further solidify Carolina Financial’s position as one of the biggest Carolinas-based community banks.

Further, a positive trend in estimate revisions reflect optimism over the company’s earnings growth prospects. The Zacks Consensus Estimate for Carolina Financial’s current-quarter earnings has moved up 6% over the last 60 days. Also, the current year’s earnings estimates have climbed 9%. As a result, the stock currently carries a Zacks Rank #2 (Buy).

The stock has surged 53% over the past 12 months, widely outperforming the industry’s gain of 18.6%.


What Makes Carolina Financial a Solid Pick?

Earnings Strength: Carolina Financial recorded an earnings growth rate of 21.6% over the last three to five years compared with 13.8% for the industry it belongs to. The earnings growth rate for the current and the next year is anticipated to be 18.6% and 18.3%, respectively.

Further, the company has an impressive earnings surprise history. The company has outpaced the Zacks Consensus Estimate consistently in each of the trailing four quarters, delivering an average surprise of 11.1%.

Revenue Growth: Organic growth remains strong at Carolina Financial. Revenues witnessed a compound annual growth rate of 23.5% over the last three years (2014-2016). Further, the top line is expected to increase 31.5% in 2017 compared with 1.1% for the industry.

Favorable ROE: Carolina Financial’s return on equity (ROE) supports its growth potential. Its ROE of 12.3% compares favorably with the industry’s average ROE of 8.2%, implying that it is efficient in using shareholders’ funds.

Leverage: Carolina Financial has a debt/equity ratio of 0.27 compared with the industry’s average of 0.31. This leverage status should help the company perform better than its peers in a volatile business environment.

Other Stocks to Consider

Some other top-ranked stocks from the finance space are Raymond Green Bancorp, Inc. GNBC, City Holding Company CHCO and Farmers Capital Bank Corporation FFKT, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Green Bancorp witnessed an upward earnings estimate revision of 18.1% for the current year, in the last 60 days. Its share price increased 94.1% in the last 12 months.

City Holding Company’s Zacks Consensus Estimate was revised 9.6% upward for the current year, in the last 60 days. The company’s share price increased 24% in the last 12 months.

Farmers Capital Bank witnessed upward earnings estimate revision of 5.1% for the current year, in the last 60 days. Its share price increased 19.4% in the last 12 months.

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