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5 Reasons to Buy First Republic Bank (FRC) Stock Right Now

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·4 min read
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It seems to be a wise idea to add First Republic FRC to your portfolio at the moment, as it remains well poised for growth with improving economic conditions. Impressive organic growth, strong fundamentals and strong liquidity position might drive the stock higher in the near term.

The stock has been witnessing upward estimate revisions, reflecting analysts’ optimism about its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for 2021 and 2022 has been revised slightly upward.

Further, this Zacks Rank #2 (Buy) stock has gained 58.5% in the past six months compared with the industry’s growth of 84.8%.

Why the Stock is an Attractive Pick Now

Revenue Growth: First Republic’s revenue growth story is impressive. Net interest income, which is also its primary source of income from operations, witnessed a five-year compound annual growth rate (2016-2020) of 15.8%. Also, non-interest income reflects growth of 13.4%, supported by steady rise in investment management fees.

This uptrend in revenues is anticipated to continue as reflected by the projected sales growth rate of 15.5% for 2021 and 13.3% for 2022. Also, management expects loan growth in the mid-teens for 2021.

Earnings Per Share: First Republic witnessed earnings per share growth of 11.4% in the last three to five years, higher than the industry’s 9.8%. Further, the company’s earnings are projected to be up 12.2% and 9.4% for 2021 and 2022, respectively. Also, M&T Bank expects long-term EPS growth rate (three-five years) of 13.4%.

Sound Liquidity Position: As of Dec 31, 2020, the company had total debt worth $13.5 billion, which reflects a fall over the past few quarters, while its cash and cash equivalents and due from banks improved to $5.1 billion. Further, time-interest-earned ratio of 5.2 has increased steadily over the past few quarters. Thus, given the favorable factors and record of consistent earnings growth, First Republic’s liquidity position seems decent enough to counter any worsening of the economic situation.

Superior Return on Equity (ROE): First Republic’s ROE of 11.04% compared with the industry average of 8.98% highlights the company’s commendable position over its peers.

Favorable Zacks Industry Rank: First Republic is part of that Zacks industry, which currently carries a Zacks Industry Rank #17 (placing it at the top 5% of more than 250 Zacks industries).

The Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Other Stocks to Consider

UMB Financial Corporation UMBF has been witnessing upward estimate revisions for the past 30 days. Additionally, the stock has jumped nearly 82% in the past six months. It currently sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Webster Financial Corporation WBS has been witnessing upward estimate revisions for the past 30 days. Additionally, the stock has jumped more than 120% in the past six months. It currently carries a Zacks Rank #2.

Washington Federal, Inc. WAFD has been witnessing upward estimate revisions for the past month. Over the past six months, the company’s share price has been up more than 42%. It currently carries a Zacks Rank of 2.

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