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4 Reasons Why SVB Financial (SIVB) is a 'Buy' Now

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Over the last couple of weeks, banking stocks have got hammered by overall negative sentiments for the sector. Growing concerns - weak domestic economic data, slowdown in global growth, stress in energy-related loan portfolios, uncertainty over further rates hikes, worsening bank profitability and capital strength, and tighter credit markets - had led to huge sell off in the banking stocks.

Nonetheless, investors should not totally ignore the sector. Though almost all the stocks bore the brunt of negative investor sentiments, there are still several stocks with strong fundamentals and improving prospects. One such stock - SVB Financial GroupSIVB - is worth considering.

With approximately $45 billion in assets as of Dec 31, 2015, SVB Financial's strength can be seen in multiple areas such as consistent top-line growth, increasing cash flow from operations and expanding profit margins.

Why an Attractive Choice?

Revenue Strength: SVB Financial's net revenue has risen at a compounded annual growth rate ("CAGR") of 15.8% over the last 4 years (2012-2015). The sturdy top-line increase was backed by strong loan growth with a 3-year (2013-2015) CAGR of 23.9% as well as deposit growth with a CAGR of 32% over the same time frame.

Additionally, the company's projected sales growth (F1/F0) of 4.71% ensures continuation of the upward revenue trend.

Earnings Per Share Growth: SVB Financial has witnessed earnings per share CAGR of 19.2% over the last 4 years (2012-2015). Also, the company bears a decent earnings surprise history, having delivered positive surprises in the trailing four quarters with an average beat of 13.23%.

Further, this earnings momentum will likely continue in the near term as reflected by the company's projected EPS growth (F1/F0) of 16% compared with the industry average rate of 9.54%. Also, the company's long-term (3-5 years) estimated EPS growth rate of 11.0% (versus the industry growth rate of 9.8%) promises rewards for investors in the long run.

Valuation Looks Reasonable: SVB Financial is currently trading more than 45% below its 52-week high price of $152.99 per share. Moreover, the company has a Value Style Score of 'B'.

The Value Style Score condenses all valuation metrics into one actionable score that helps investors steer clear of 'value traps' and identify stocks that are truly trading at a discount. Our research shows that stocks with Style Scores of 'A' or 'B', when combined with Zacks Rank of #1 (Strong Buy) or #2 (Buy), offer the best upside potential.

Favorable Zacks Rank: SVB Financial currently carries a Zacks Rank #2. This is driven by upward revision in the Zacks Consensus Estimate over the last 30 days, which rose 5.5% for 2016 and 2.5% for 2017.

Other Stocks Worth a Look

Other stocks worth considering in the financial sector include American River Bankshares AMRB , Bank of Marin Bancorp BMRC and BofI Holding, Inc. BOFI . All three stocks hold the same Zacks Rank as SVB Financial.

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Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AMER RIVER BSH (AMRB): Free Stock Analysis Report

SVB FINL GP (SIVB): Free Stock Analysis Report

BANK OF MARIN (BMRC): Free Stock Analysis Report

BOFI HLDG INC (BOFI): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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