It seems to be a wise idea to add Bank OZK OZK stock to your investment portfolio now, given the steady rise in loan and deposit balances, and organic and business restructuring initiatives. Also, its enhanced capital deployments reflect a strong liquidity position.
Further, analysts seem bullish on the stock. The Zacks Consensus Estimate for earnings has been revised 12.1% upward for 2020 over the past 60 days. Likewise, the consensus estimate for 2021 have moved 18.5% north over the same time frame. The stock currently carries a Zacks Rank #2 (Buy).
Bank OZK’s price performance also looks encouraging. Its shares have rallied 15.6% in the past six months against decline of 12.9% for the industry.
Factors That Makes Bank OZK a Solid Bet
Earnings strength: Bank OZK’s earnings have grown at the rate of 7.4% over the past three to five years, driven by solid top-line performance and strategic buyouts. While the company’s earnings are expected to decline 49.4% for 2020, the same is projected to grow at the rate of 57.7% for 2021.
Revenue growth: Bank OZK has grown substantially through de novo branching strategy and inorganically. Over the last six years (2014-2019), the company’s revenues witnessed a CAGR of 22.8%. Given its strong balance sheet position, the bank is expected to continue expanding through acquisitions. Nonetheless, the company has announced exit from the South Carolina and Alabama states as it was not able to function efficiently there.
Its projected consensus sales are expected to fall 2.2% this year, while the same are likely to increase 3% next year.
Solid balance sheet and liquidity position: As of Jun 30, 2020, Bank OZK had total debt worth $1.26 billion, while its cash and cash equivalents were $1.65 billion. Also, its total debt to total capital of 23.3% in second-quarter 2020 improved sequentially. Though its times-interest-earned of 20X in the second quarter declined from the prior quarter, robust liquidity position and decent earnings strength are likely to help the company meet debt obligations in the near term, even if the economic situation worsens.
Impressive capital deployments: Bank OZK has been regularly increasing its quarterly dividend. In July 2020, it hiked dividend for the 40th consecutive quarter. Considering the last day’s closing price of $20.40, the company’s dividend yield currently stands at 5.34% compared with industry average of 3.01%.
Given the robust capital position, lower debt equity and dividend payout ratios compared with its peers, the company is expected to sustain its capital deployment activities. Hence, it is likely to continue enhancing shareholder value.
Stock looks undervalued: Bank OZK looks undervalued when compared with the broader industry. Its current PEG and price/book ratios are below the respective industry averages.
The stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. Our research shows that stocks with a Growth Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Bank Stocks Worth a Look
Mid Penn Bancorp’s MPB current-year earnings estimates have moved 24.3% north in 60 days’ time. Also, the stock has moved marginally lower over the past three months. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Old Second Bancorp OSBC has witnessed an upward earnings estimate revision of 8.5% for 2020 over the past 60 days. Also, this Zacks #2 Ranked stock has gained 1.9% over the past three months.
Independent Bank Corporation’s IBCP ongoing-year earnings estimates have moved up 28.2% in the past 60 days. Further, the company’s shares have declined 8.9% over the past three months. At present, it carries a Zacks Rank of 2.
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