Hilltop Holdings Inc. HTH can be a solid bet now, on the back of its organic and inorganic growth strategies which have placed it well for the future. Moreover, the bank’s focus on capital deployment is also encouraging.
Further, the recent hike in interest rate is likely to stabilize the top line, which will create a buying opportunity for long-term horses. Though increasing risk and compliance requirements remain a concern for Hilltop Holdings, given the strictly regulated nature of banking operations, management has been taking steps to tackle expense growth. This, in turn, is likely to make the growth path smoother.
Therefore, it’s a good idea to add stocks with robust fundamentals and long-term growth opportunities to your portfolio, at the current level.
With $12.7 billion in assets as of Dec 31, 2016, Hilltop Holdings’ strengths include growth through inorganic routes, strong deposit and loans balances, and steady capital deployment activities.
7 Reasons Why Hilltop Holdings is a Must Buy
Earnings Strength: Hilltop Holdings has witnessed historical (3–5 years) earnings per share growth of 6.72%, as compared with 10.67% growth recorded by the industry. In addition, the company’s estimated long-term EPS growth rate of 19.93% promises rewards for investors.
Inorganic Growth Strategy: Hilltop Holdings has grown significantly through acquisitions. Since the acquisition of PlainsCapital in 2012, the total size of the company’s business has expanded tremendously as it consolidated its position in the markets of Texas, Oklahoma, Georgia, Tennessee and Arizona. Over the years, the company acquired First National Bank (an FDIC-assisted transaction) and SWS Group, Inc. These deals have aided the company to diversify its operations from core P&C insurance into a profitable banking operation, thereby substantially adding stability and visibility to operating leverage in the future.
Leverage: Hilltop Holdings’ debt/equity ratio stands at 0.04 against the industry average of 0.31, indicating lower debt burden compared with the industry. It highlights the company’s sound financial flexibility.
Steady Capital Deployment: Hilltop Holdings is well positioned per the regulatory requirements. Given its strong balance sheet, the company announced dividend for the first time in Oct 2016. Further, the company has a $50-million share repurchase authorization in place.
Favorable Zacks Rank: Hilltop Holdings currently carries a Zacks Rank #2 (Buy). This has been driven by upward estimate revisions for the last 30 days. For 2017, the Zacks Consensus Estimate moved up around 1.1% to $1.17 and slightly to $1.97 for 2018.
Stock is Undervalued: Hilltop Holdings has a P/E ratio of 14.99x, compared to the industry average of 17.65x. In addition, the company has a P/B ratio of 1.38x, compared to the industry average of 1.45x. Based on these ratios, the stock seems undervalued.
Share Price Movement: Hilltop Holdings’ shares gained 17.9% over the last six months, compared with 26.5% growth recorded by the Zacks categorized Southeast Banks industry.
Stocks to Consider
Comerica Incorporated CMA has been witnessing upward estimate revisions for the last 30 days. Further, the stock surged over 43% over the past six months. It currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Citigroup Inc. C has been witnessing stable estimates for the last seven days, with the company’s shares rising nearly 25.8% over the last six months. It presently holds a Zacks Rank #2.
Bank of America Corporation BAC has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company’s share price has been up more than 49%. It also carries a Zacks Rank #2.
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