It seems to be a wise idea to add Hilltop Holdings Inc. HTH stock to your portfolio now. Driven by continued rise in demand for loans and higher interest rates, the company’s top line is expected to improve further. Moreover, its steady capital deployments reflect strong balance sheet position.
The stock has been witnessing upward estimate revisions off late, reflecting analysts’ optimism regarding its earnings growth potential. Over the past 30 days, the Zacks Consensus Estimate for Hilltop Holdings’ 2019 earnings has been revised nearly 5.1% upward. Thus, the stock currently carries a Zacks Rank #2 (Buy).
The company’s price performance also seems impressive. The stock has gained 13% in the past six months, outperforming the industry’s growth of 11.6%.
Mentioned below are some other aspects that make Hilltop Holdings a solid pick right now.
Earnings Growth: Hilltop Holdings’ earnings witnessed nearly 1% decline in the last three-five years. Nevertheless, this trend is expected to reverse in the near term as reflected by its projected earnings per share (EPS) growth rate of more than 28% for 2019 (higher than the industry average of 6.1%) and 7.1% for 2020.
Inorganic Growth Strategy: Hilltop Holdings has grown significantly through acquisitions. Since the buyout of PlainsCapital in 2012, the company’s business has expanded tremendously as it consolidated its position in Texas, Oklahoma, Georgia, Tennessee and Arizona. Further, in 2018, it acquired The Bank of River Oaks, which will likely be accretive to its earnings. These deals helped it to diversify its operations from core P&C insurance to a profitable banking operation, thereby substantially adding stability and visibility to operating leverage in the future.
Revenue Strength: Supported by acquisitions, loan growth and higher rates, the company’s net interest income (NII) increased at a CAGR of 4.8% over the last five years (2014-2018). In fact, the top line is expected to continue to grow in the near term as can be seen from its projected sales growth rates of 1.5% for 2019 and 1% for 2020.
Strong Leverage: Hilltop Holdings’ debt/equity ratio of 0.03 is below the industry’s current debt/equity ratio of 0.21. This shows that the company will be financially stable, even in adverse economic conditions.
Valuation Looks Reasonable: Hilltop Holdings’ stock looks undervalued right now, with respect to its price-to-book and price-to-sales ratios. It has a P/B ratio of 0.92, lower than the industry average of 1.18. Additionally, the company’s P/S ratio of 1.14 is below the industry average of 2.85.
Further, Hilltop Holdings has a Value Score of A. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Key Picks
A few other top-ranked stocks in the finance space are First Bancorp FBNC, Cadence Bancorporation CADE and M&T Bank Corporation MTB. Each of these stocks currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Over the past 60 days, First Bancorp witnessed an upward earnings estimate revision of 1.6% for the current year. Its share price has increased 9.6% in the past six months.
Cadence Bancorp’s Zacks Consensus Estimate for earnings in 2019 has been revised 8.8% upward over the past 60 days. Its shares have gained nearly 18.8% in the past six months.
Over the past 60 days, M&T Bank witnessed a marginal upward earnings estimate revision for the current year. Its share price has rallied 17.6% in the past six months.
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