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Is Now The Right Time To Invest In Financials And Northrim BanCorp Inc (NASDAQ:NRIM)?

Northrim BanCorp Inc (NASDAQ:NRIM), a US$299.66m small-cap, operates in the banking industry, which now face the choice of either being disintermediated or proactively disrupting their own business models to thrive in the future. Financial services analysts are forecasting for the entire industry, a strong double-digit growth of 23.40% in the upcoming year , and a massive growth of 33.65% 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 Northrim BanCorp is a laggard or leader relative to its financial sector peers.

Check out our latest analysis for Northrim BanCorp

What’s the catalyst for Northrim BanCorp’s sector growth?

NasdaqGS:NRIM Past Future Earnings August 17th 18
NasdaqGS:NRIM Past Future Earnings August 17th 18

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. Northrim BanCorp is neither a lagger nor a leader, and has been growing in-line with its industry peers at around 10.85% in the prior year. However, analysts are expecting the company to accelerate ahead of its peers over the next year, and deliver a 28.28% growth next year. This growth may make Northrim BanCorp a more expensive stock relative to its peers.

Is Northrim BanCorp and the sector relatively cheap?

NasdaqGS:NRIM PE PEG Gauge August 17th 18
NasdaqGS:NRIM PE PEG Gauge August 17th 18

Banking companies are typically trading at a PE of 16.26x, in-line with the US stock market PE of 18.08x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 8.83% compared to the market’s 11.40%, potentially indicative of past headwinds. On the stock-level, Northrim BanCorp is trading at a PE ratio of 19.54x, which is relatively in-line with the average banking stock. In terms of returns, Northrim BanCorp generated 7.88% in the past year, in-line with its industry average.

Next Steps:

Northrim BanCorp’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Northrim BanCorp has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Northrim BanCorp’s fundamentals in order to build a holistic investment thesis.

  1. 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.

  2. Historical Track Record: What has NRIM’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.

  3. Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Northrim 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 editorial-team@simplywallst.com.

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