Coastway Bancorp Inc (NASDAQ:CWAY), a USD$96.63M small-cap, operates in the mortgage and thrifts industry, whose growth is generally driven by economic condition, determining the rate of interest and inflation. Financial services analysts are forecasting for the entire industry, a relatively muted growth of 3.13% in the upcoming year . Today, I’ll take you through the sector growth expectations, and also determine whether Coastway Bancorp is a laggard or leader relative to its financial sector peers. View our latest analysis for Coastway Bancorp
What’s the catalyst for Coastway Bancorp’s sector growth?
The mortgage industry is characterized by stable product offerings, consolidation and increasing levels of external competition. Over the past year, the industry saw growth in the teens, beating the US market growth of 10.81%. Coastway Bancorp lags the pack with its negative growth rate of -1.56% over the past year, which indicates the company will be growing at a slower pace than its mortgage and thrifts peers. As the company trails the rest of the industry in terms of growth, Coastway Bancorp may also be a cheaper stock relative to its peers.
Is Coastway Bancorp and the sector relatively cheap?
The mortgage and thrifts sector’s PE is currently hovering around 23x, relatively similar to the rest of the US stock market PE of 20x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 5.78% compared to the market’s 10.44%, potentially indicative of past headwinds. On the stock-level, Coastway Bancorp is trading at a higher PE ratio of 29x, making it more expensive than the average mortgage and thrifts stock. In terms of returns, Coastway Bancorp generated 4.40% in the past year, which is 1% below the mortgage and thrifts sector.
What this means for you:
Are you a shareholder? Coastway Bancorp has been a mortgage and thrifts industry laggard in the past year. In addition to this, the stock is trading at a PE above its peers, meaning it is more expensive on a relative earnings basis. This may indicate it is the right time to sell out of the stock, if your initial investment thesis is around the growth prospects of Coastway Bancorp, since there are other mortgage and thrifts companies that have delivered higher growth, and are possibly trading at a cheaper price as well.
Are you a potential investor? If Coastway Bancorp has been on your watchlist for a while, now may be the best time to enter into the stock. Its lagging growth rate compared to its mortgage and thrifts peers in the near term doesn’t build up its investment thesis, and in addition to this, it is also trading at a PE above these companies. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the financials sector.
For a deeper dive into Coastway Bancorp’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other financial stocks instead? Use our free playform to see my list of over 600 other financial companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.