U.S. Markets closed

Is Banc of California (BANC) a Great Stock for Value Investors?

Zacks Equity Research

Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?

One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Banc of California, Inc. BANC stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:

PE Ratio

A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.

On this front, Banc of California has a trailing twelve months PE ratio of 16.6, as you can see in the chart below:

This level actually compares pretty favorably with the market at large, as the PE for the S&P 500 compares in at about 21.2. If we focus on the stock’s long-term PE trend, the current level puts Banc of California’s current PE ratio considerably above its midpoint (which is 11.9) over the past three years.

Further, the stock’s PE also compares favorably with the industry’s trailing twelve months PE ratio, which stands at 19.5. At the very least, this indicates that the stock is relatively undervalued right now, compared to its peers.

We should also point out that Banc of California has a forward PE ratio (price relative to this year’s earnings) of 23.9, so it is fair to expect an increase in the company’s share price in the near future.  

P/S Ratio

Another key metric to note is the Price/Sales ratio. This approach compares a given stock’s price to its total sales, where a lower reading is generally considered better. Some people like this metric more than other value-focused ones because it looks at sales, something that is far harder to manipulate with accounting tricks than earnings.

Right now, Banc of California has a P/S ratio of about 1.6. This is significantly lower than the S&P 500 average, which comes in at 3.4 right now. Also, as we can see in the chart below, this is noticeably below the highs for this stock in particular over the past few years.

If anything, this suggests some level of undervalued trading—at least compared to historical norms.   

Broad Value Outlook

In aggregate, Banc of California currently has a Value Style Score of B, putting it into the top 40% of all stocks we cover from this look. This makes BANC a solid choice for value investors, and some of its other key metrics make this pretty clear too.

For example, the P/CF ratio (another great indicator of value) comes in at 10.9, which is somewhat better than the industry average of 14.3. Clearly, BANC is a solid choice on the value front from multiple angles.

What About the Stock Overall?

Though Banc of California might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of C and a Momentum score of A. This gives BANC a VGM score—or its overarching fundamental grade—of A. (You can read more about the Zacks Style Scores here >>)

Meanwhile, the company’s recent earnings estimates have been encouraging. The current quarter has seen two estimates go higher in the past sixty days and two lower, while the full year estimate has seen five upward and no downward revisions in the same time period.

This has had a favorable impact on the consensus estimate, as the current quarter consensus estimate has risen about 4.5% in the past two months, while the full year estimate has increased 8.6%. You can see the consensus estimate trend and recent price action for the stock in the chart below:

Banc of California, Inc. Price and Consensus


Banc of California, Inc. Price and Consensus | Banc of California, Inc. Quote

The stock holds a Zacks Rank #3 (Hold), which indicates expectations of in-line performance from the company in the near term. However, Banc of California is enjoying bullish analyst sentiment, as indicated by the positive estimate revisions, and this works in the company’s favor.

Bottom Line

Banc of California is an inspired choice for value investors, as it is hard to beat its incredible lineup of statistics on this front. However, with a sluggish industry rank (bottom 25% out of more than 250 industries) and a Zacks Rank #3, it is hard to get too excited about this company overall. In fact, over the past one year, the sector has clearly underperformed the broader market, as you can see below:

Despite positive estimate revision activity, investors should wait for industry trends and broader factors to turn around first.  When they do, this stock could be a compelling value pick.

More Stock News: This Is Bigger than the iPhone!

It could become the mother of all technological revolutions. Apple sold a mere 1 billion iPhones in 10 years but a new breakthrough is expected to generate more than 27 billion devices in just 3 years, creating a $1.7 trillion market.

Zacks has just released a Special Report that spotlights this fast-emerging phenomenon and 6 tickers for taking advantage of it. If you don't buy now, you may kick yourself in 2020.

Click here for the 6 trades >>

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Banc of California, Inc. (BANC) : Free Stock Analysis Report
To read this article on Zacks.com click here.
Zacks Investment Research