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Tickers in this Article: WSFS
WSFS Financial (WSFS) delivered a big second quarter earnings beat, prompting analysts to revise their estimates significantly higher for both 2013 and 2014.This drove the stock to a Zacks Rank #1 (Strong Buy).Although shares of WSFS have been soaring, the valuation picture still looks very reasonable, leaving the stock with plenty of room to continue running higher.WSFS Financial Corporation is the parent company of WSFS Bank, which is the oldest, locally-managed bank and trust company headquartered in Delaware. The company has 51 offices located in Delaware (42), Pennsylvania (7), Virginia (1) and Nevada (1) and provides commercial and retail banking, as well as trust and wealth management. It was founded in 1832 and has $4.4 billion in assets.Second Quarter ResultsWSFS reported better-than-expected second quarter results on July 25. Earnings per share came in at $1.16, crushing the Zacks Consensus Estimate of $0.88. It was a stellar 53% increase over the same quarter last year.A big reason for this was a significant reduction in the provision for loan losses year-over-year as credit quality continued to improve. The ratio of nonperforming assets to total assets, for instance, improved 15 basis points to 1.34%.Net interest income was essentially flat year-over-year as solid commercial loan growth was offset by a continued decrease in residential mortgage loans, reflecting the company's strategy of selling these loans in the secondary market. The net interest margin declined 3 basis points year-over-year to 3.50%, but this was a 4bp improvement from Q1.Estimates JumpFollowing solid Q2 results, analysts revised their estimates significantly higher for both 2013 and 2014, sending the stock to a Zacks Rank #1 (Strong Buy).The Zacks Consensus Estimate for 2013 is now $4.27, up from $3.69 before the report. The 2014 consensus is currently $4.37, up from $3.90 over the same period.The small cap bank industry has been hot recently, due in part to solid second quarter results and a steepening yield curve. In fact, the 'Finance - Savings & Loan' industry ranks in the top 10% of all industries that Zacks ranks.ValuationShares of WSFS have been on a tear recently, climbing more than +20% since June 20. But the valuation picture still looks reasonable given the big increase in estimates. The stock currently trades at 14x 12-month forward earnings, in-line with its 10-year median and below the industry median of 18x.Its price to book ratio of 1.3 is in-line with its historical median and its peers.The Bottom LineWith favorable industry tailwinds, strong earnings momentum and reasonable valuation, WSFS offers investors attractive upside potential.Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research and Editor of the Income Plus Investor service.

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