Given all of the recent volatility in the financial industry, it is not surprising that many companies have accrued debt to stay alive. But not all financial companies have taken on debt and that was our focus today. To find healthy financial stocks, we looked specifically for those with impressive EPS growth projections for the next year and minimal debt. When a company is relatively debt free, it has more freedom to pursue tactics that enhance growth. We put these ideas together and developed an intriguing list of financial stocks for your consideration.
EPS growth (earnings per share growth) illustrates the growth of earnings per share over time. The 1-Year Expected EPS growth rate is an annual growth estimate, where the growth projections are made by analysts, the company or other credible sources.
The long-term debt/equity ratio is a variation of the traditional debt-to-equity ratio; this value computes the proportion of a company's long-term debt compared to its available capital. By using this ratio, investors can identify the amount of leverage utilized by a specific company and compare it to others to help analyze the company's risk exposure. Generally, companies that finance a greater portion of their capital via debt are considered riskier than those with lower leverage ratios.
The debt/equity ratio illustrates how aggressively a company is financing its growth via debt. The more debt financing that is used in a capital structure, the more volatile earnings can become due to the additional interest expense. Should a company's potentially enhanced earnings fail to exceed the cost associated with debt financing over time, this can lead the company toward substantial trouble.
We first looked for financial stocks. Then we looked for businesses with projected high growth, measured by 1-year projected EPS growth above 25%. Next, we screened for businesses that have maintained a sound long term capital structure (Long Term D/E Ratio<.1). We then screened for businesses that have maintained a sound capital structure (D/E Ratio<.1). We did not screen out any market caps.
Do you think these stocks should be priced higher? Use this list as a starting-off point for your own analysis.
1) First Bancorp (FBNC)
| Sector | Financial |
| Industry | Regional - Mid-Atlantic Banks |
| Market Cap | $159.78M |
| Beta | 0.89 |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 2100.00% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 2.93% |
First Bancorp operates as the bank holding company for First Bank that provides various banking services to individuals and small to medium-sized businesses. It offers deposit products, such as checking, savings, NOW, and money market accounts, as well as time deposits, including certificates of deposits and individual retirement accounts. The company also provides loans for various consumer and commercial purposes comprising loans for business, agriculture, real estate, personal uses, home improvement, and automobiles. In addition, it offers credit cards, debit cards, letters of credit, and safe deposit box rental services, as well as electronic funds transfer services, consisting of wire transfers.
Further, the company provides Internet banking, mobile banking, cash management, and bank-by-phone capabilities, as well as access to approximately 67,000 automated teller machines. Additionally, it engages in the placement of property and casualty insurance products. As of May 22, 2012, the company operated 97 branches, including 82 branches in North Carolina, 9 branches in South Carolina, and 6 branches in Virginia, as well as 1 loan production office in Blacksburg, Virginia. First Bancorp was founded in 1934 and is headquartered in Troy, North Carolina.
2) TFS Financial Corp (TFSL)
| Sector | Financial |
| Industry | Regional - Midwest Banks |
| Market Cap | $2.64B |
| Beta | 0.45 |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 250.00% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 1.20% |
TFS Financial Corporation operates as a holding company for Third Federal Savings and Loan Association of Cleveland. The company provides retail consumer banking, including mortgage lending, deposit gathering, and other financial services in Ohio and Florida. Its deposit accounts consist of savings accounts, negotiable order of withdrawal accounts, certificates of deposit accounts, individual retirement accounts, and other qualified plan accounts. The company also offers residential real estate mortgage loans, home equity loans, lines of credit, residential construction loans, and consumer loans. It operates 39 full-service branches and 8 loan production offices. TFS Financial Corporation, through its subsidiary, Third Capital, Inc. engages in net lease transactions of commercial buildings; maintains minority investments in private equity funds, and provide escrow and settlement services; and reinsures private mortgage insurance on residential mortgage loans. The company was founded in 1938 and is headquartered in Cleveland, Ohio.
3) Cascade Bancorp (CACB)
| Sector | Financial |
| Industry | Regional - Pacific Banks |
| Market Cap | $229.45M |
| Beta | 1.67 |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 341.67% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 1.04% |
Cascade Bancorp operates as the holding company for Bank of the Cascades that offers a range of commercial and retail banking services. The company's deposit products include checking, money market, time deposit, and savings accounts. Its loan portfolio comprises commercial real estate loans, real estate construction and development loans, commercial and industrial loans, and residential mortgage loans, as well as consumer installment, line-of-credit, credit cards, and home equity loans. The company also provides investment and trust related services, cash management services, Internet banking, automated teller machines, safe deposit facilities, electronic bill payment, and remote deposit services. As of May 4, 2012, Cascade Bancorp operated 32 branches in central Oregon, southern Oregon, Portland/Salem, and Boise/Treasure Valley. It serves small to medium-sized businesses, municipalities and public organizations, and professional and consumer relationships. The company was founded in 1977 and is headquartered in Bend, Oregon.
4) BankFinancial Corp. (BFIN)
| Sector | Financial |
| Industry | Savings & Loans |
| Market Cap | $161.61M |
| Beta | 0.85 |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 4400.00% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.05 |
| Short Interest | 3.72% |
BankFinancial Corporation operates as the holding company for BankFinancial, F.S.B. that provides commercial, family, and personal banking services primarily in Illinois. Its deposit accounts consist of savings accounts, NOW accounts, checking accounts, money market accounts, certificates of deposit, and IRAs, and other qualified plan accounts. The company offers investment and business loans, such as multi-family, nonresidential real estate, commercial, construction and land loans, and commercial leases, as well as one-to-four family residential mortgage loans comprising home equity loans, and lines of credit.
It also provides various financial products and services, including cash management, funds transfers, bill payment and other online banking transactions, automated teller machines, and safe deposit boxes. In addition, the company offers wealth management services comprising investment, financial planning, and other wealth management services; and sells life insurance, property and casualty insurance, and other insurance products on an agency basis. As of March 29, 2012, it operated 20 full-service banking offices located in Cook, DuPage, Lake, and Will Counties, Illinois. The company was founded in 1924 and is headquartered in Burr Ridge, Illinois.
5) First Pactrust Bancorp Inc. (BANC)
| Sector | Financial |
| Industry | Regional - Pacific Banks |
| Market Cap | $129.55M |
| Beta | 1.28 |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 216.67% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 5.12% |
First PacTrust Bancorp, Inc. operates as a holding company for Pacific Trust Bank that provides retail banking services. The company offers various deposit accounts, such as savings accounts, money market deposits, NOW and demand accounts, certificates of deposits, and checking accounts to individuals and businesses. Its loan portfolio comprises one-to four-family residential real estate, green account loans, commercial and multi-family real estate, construction lending and land loans, and commercial business loans. In addition, the company offers consumer and other real estate loans, including unsecured loans; and various secured consumer loans, such as second trust deed home equity loans and home equity lines of credit, as well as loans secured by savings deposits. As of July 2, 2012, it operated 18 banking offices, primarily serving San Diego, Orange, Los Angeles, and Riverside counties in California. First PacTrust Bancorp, Inc. was founded in 1941 and is headquartered in Irvine, California.
6) Ares Commercial Real Estate Corporation (ACRE)
| Sector | Financial |
| Industry | REIT - Diversified |
| Market Cap | $151.75M |
| Beta | - |
Key Metrics
| 1-Year Projected Earnings Per Share Growth Rate | 387.90% |
| Long Term Debt/Equity Ratio | 0.00 |
| Debt/Equity Ratio | 0.00 |
| Short Interest | 3.88% |
Ares Commercial Real Estate Corporation, a specialty finance company, operates as a real estate investment trust. It originates, invests in, and manages middle-market commercial real estate loans and other commercial real estate investments. The company also provides financing solutions for middle market borrowers. Its product offerings include senior loans, stretch senior loans, transitional senior loans, and subordinate debt. In addition, the company undertakes various transaction types, including acquisition, recapitalization, restructuring, and general refinancing. It intends to elect to be taxed as a real estate investment trust. Ares Commercial Real Estate Management LLC operates as the manager of the company. Ares Commercial Real Estate Corporation was incorporated in 2011 and is headquartered in Chicago, Illinois.
*Company profiles were sourced from Google Finance and Yahoo Finance. Financial data was sourced from Finviz on August 23, 2012.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
Business relationship disclosure: This article was prepared for ZetaKap Media by one of our full-time analysts. We did not receive compensation for this article (other than from Seeking Alpha), and we have no business relationship with any company whose stock is mentioned in this article.
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