Community Trust Bancorp Inc (NASDAQ:CTBI), a US$880.0m small-cap, is a bank operating in an industry, which has been simplifying their business and operating models over the last few years, both for economic reasons and to reduce organizational complexity. Financial services analysts are forecasting for the entire industry, a positive double-digit growth of 22.9% in the upcoming year , and a massive growth of 35.6% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, and also determine whether Community Trust Bancorp is a laggard or leader relative to its financial sector peers.
What’s the catalyst for Community Trust Bancorp’s sector growth?
The threat of disintermediation in the payments industry is both real and imminent, taking profits away from traditional incumbent financial institutions. In the past year, the industry delivered growth in the teens, though still underperforming the wider US stock market. Community Trust Bancorp leads the pack with its impressive earnings growth of 19.3% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be 4.7% compared to the wider banking sector growth hovering in the twenties next year. As a future industry laggard in growth, Community Trust Bancorp may be a cheaper stock relative to its peers.
Is Community Trust Bancorp and the sector relatively cheap?
The banking sector’s PE is currently hovering around 16.33x, in-line with the US stock market PE of 18.32x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 8.8% compared to the market’s 11.4%, potentially indicative of past headwinds. On the stock-level, Community Trust Bancorp is trading at a PE ratio of 15.65x, which is relatively in-line with the average banking stock. In terms of returns, Community Trust Bancorp generated 10.3% in the past year, which is 1.5% over the banking sector.
If Community Trust Bancorp has been on your watchlist for a while, now may not be the best time to enter into the stock. The company is a banking industry laggard in terms of its future growth outlook, and is trading relatively in-line with its peers. If growth and mispricing are important aspects for your investment thesis, there may be better investments in the financial sector. However, before you make a decision on the stock, I suggest you look at Community Trust Bancorp’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has CTBI’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Community Trust Bancorp? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.