United Community Financial Corp (NASDAQ:UCFC), a US$482.8m small-cap, is a financial services company operating in an industry, which is impacted by macroeconomic factors such as interest rate changes and inflation. Financial services analysts are forecasting for the entire industry, a positive double-digit growth of 27.9% in the upcoming year , and a robust short-term growth of 26.4% over the next couple of years. However, this rate came in below the growth rate of the US stock market as a whole. Below, I will examine the sector growth prospects, as well as evaluate whether United Community Financial is lagging or leading in the industry.
What’s the catalyst for United Community Financial’s sector growth?
The mortgage industry is characterized by stable product offerings, consolidation and increasing levels of external competition. In the previous year, the industry saw growth of 9.4%, though still underperforming the wider US stock market. United Community Financial leads the pack with its impressive earnings growth of 51.6% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with United Community Financial poised to deliver a 30.7% growth over the next couple of years compared to the industry’s 27.9%. This growth may make United Community Financial a more expensive stock relative to its peers.
Is United Community Financial and the sector relatively cheap?
The mortgage and thrifts sector’s PE is currently hovering around 19.69x, relatively similar to the rest of the US stock market PE of 20.57x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 6.2% compared to the market’s 10.4%, potentially indicative of past headwinds. On the stock-level, United Community Financial is trading at a PE ratio of 15.97x, which is relatively in-line with the average mortgage and thrifts stock. In terms of returns, United Community Financial generated 10.0% in the past year, which is 3.8% over the mortgage and thrifts sector.
United Community Financial’s future growth prospect aligns with that of the broader market and it is trading in-line with its peers. So if you like its growth prospects, you’ll be paying a fair value for the company. If the stock has been on your watchlist for a while, now may be the time to enter. However, before you make a decision on the stock, I suggest you look at United Community Financial’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 UCFC’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 United Community Financial? 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 email@example.com.