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Washington Federal, Inc. WAFD continues to benefit from solid organic growth and a robust liquidity position. However, near-zero interest rates and the coronavirus-induced economic slowdown are major near-term concerns.
Washington Federal’s organic growth looks impressive. The company’s revenues witnessed a CAGR of 4.1% over the last five years (2015-2019). During the same period, loans witnessed a CAGR of 6.8%. This rising trend continued in the first six months of fiscal 2020 as well. The company’s top line is expected to grow further with a constant rise in demand for loans.
As of Mar 31, 2020, Washington Federal had a total debt of $3.1 billion, and cash and cash equivalents worth $1.5 billion. The company’s times interest earned ratio at the end of the first quarter stood at 5.3X, unchanged sequentially. This, along with the company’s record of consistent earnings growth, leads to a lesser likelihood of default on interest and/or debt repayments if the economic situation worsens further.
However, lower interest rates are expected to continue hurting Washington Federal’s net interest margin (NIM). The NIM declined to 3.16% in fiscal 2019 from 3.27% in fiscal 2018. For the first half of fiscal 2020 as well, the company witnessed a contraction in the NIM. Despite continued loan growth, NIM growth is likely to remain muted in the near term due to near-zero interest rates.
Further, analysts are bearish on the stock. The Zacks Consensus Estimate for earnings has been revised 7.1% and 9.6% downward for 2020 and 2021, respectively, over the past month.
Also, shares of this Zacks Rank #3 (Hold) company have lost 36.8% so far this year compared with the 44.5% decline recorded by the industry. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Stocks to Consider
Merchants Bancorp’s MBIN Zacks Consensus Estimate for 2020 earnings moved 15.9% upward to $2.33 over the past month. The stock currently holds a Zacks Rank of 2 (Buy).
Eagle Bancorp Montana, Inc.’s EBMT Zacks Consensus Estimate for current-year earnings moved 7.5% upward to $2.16 in a month’s time. The stock currently carries a Zacks Rank of 2.
Southern National Bancorp of Virginia, Inc.’s SONA Zacks Consensus Estimate for the ongoing-year earnings moved 6% upward to $1.41 in two months’ time. The stock currently carries a Zacks Rank of 2.
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Washington Federal, Inc. (WAFD) : Free Stock Analysis Report
Eagle Bancorp Montana, Inc. (EBMT) : Free Stock Analysis Report
Southern National Bancorp of Virginia, Inc. (SONA) : Free Stock Analysis Report
Merchants Bancorp (MBIN) : Free Stock Analysis Report
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