What Makes Bank OZK (OZK) Stock Worth Betting On Right Now
Bank OZK OZK is well-positioned for top-line growth, supported by efforts to diversify the loan portfolio and strengthen fee income. The company’s solid loan balance, along with high interest rates, will keep aiding growth.
Analysts also seem bullish on the stock. Over the past 60 days, the Zacks Consensus Estimate for OZK’s earnings has been revised marginally and 3.2% upward for 2024 and 2025, respectively. The stock currently carries a Zacks Rank #2 (Buy).
Bank OZK’s shares have rallied 14.1% over the past year, significantly outperforming the industry’s growth of 0.6%.
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Reasons to Invest in the OZK Stock
Earnings Strength: Bank OZK’s earnings witnessed growth of 18.1% over the last three to five years, driven by a solid top-line performance and strategic buyouts. The number is also impressive compared with the industry’s average of 9.1%.
The challenging operating backdrop will weigh on the company’s earnings this year, and hence, we expect earnings to fall 2.4%. Nonetheless, we project earnings to rebound and grow at the rate of 5.1% and 3.1% in 2025 and 2026, respectively.
Revenue Growth: Bank OZK has grown substantially through the de novo branching strategy and inorganically. Its revenues witnessed a CAGR of 16.3% over the last three years (ended 2023), mainly driven by steady loan growth, higher rates and a rise in fee income.
Further, with an aim to realign its business per customer needs, OZK evaluated its branch network and exited from Alabama and South Carolina while closing a few branches in Arkansas, Florida, Georgia and New York.
Driven by efforts to bolster fee income, a focus on strengthening the mortgage banking business and diversifying the loan portfolio, revenues will continue to improve. Our estimate for total net revenues reflects a CAGR of 2.8% by 2026.
Manageable Debt Level: As of Dec 31, 2023, the company had total debt of $1.30 billion, and cash and cash equivalents of $2.15 billion. Thus, given a robust liquidity position and decent earnings strength, Bank OZK is expected to continue to meet debt obligations in the near term, even if the economic situation worsens.
Further, the company’s debt/equity ratio of 0.27 is lower than the industry average of 0.41.
Impressive Capital Distributions: Bank OZK has been regularly increasing its quarterly dividend. In January, it hiked its dividend for the 54th consecutive quarter to 38 cents per share. Based on the last day’s closing price of $42.89, its dividend yield currently stands at 3.54%, higher than the industry average of 2.96%.
The company hasn’t announced any new share repurchase plan after its prior buyback authorization expired in November 2023. Given a robust capital position and lower debt-equity and dividend payout ratios than peers, OZK is expected to sustain its capital distribution activities.
Superior Return on Equity (ROE): Bank OZK’s trailing 12-month ROE reflects its superiority in terms of utilizing shareholder funds compared with its peers. The company has an ROE of 15.13%, higher than the industry average of 9.54%.
Stock Seems Undervalued: OZK has a Price/Earnings (P/E) (F1) of 7.54 compared with the industry’s P/E (F1) of 9.66.
Also, the stock has a Value Score of B. Our research suggests that stocks with a Style Score of A or B, when combined with Zacks Rank #1 (Strong Buy) or 2, offer the highest upside potential.
Other Bank Stocks Worth a Look
A couple of other top-ranked stocks from the banking space are Zions Bancorporation ZION and Fulton Financial Corporation FULT. At present, ZION and FULT each carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
ZION’s 2023 earnings estimates have been revised slightly north over the past 30 days. Over the past six months, shares of Zions have risen 10.3%.
The Zacks Consensus Estimate for FULT’s current-year earnings has been revised marginally upward over the past 30 days. Fulton Financial’s shares have rallied 15.7% over the past six months.
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Zions Bancorporation, N.A. (ZION) : Free Stock Analysis Report
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Bank OZK (OZK) : Free Stock Analysis Report
