Texas Capital Bancshares (TCBI) has put some big losses behind it and is poised for growth. The stock is a Zacks #1 Rank (Strong Buy).
Company Description
Texas Capital Bancshares operates as the holding company for Texas Capital Bank and provides various banking products and services for commercial and high net worth customers in Texas. It primarily engages in generating deposits and originating loans. The company’s deposit products include consumer checking accounts, savings accounts, money market accounts, and certificates of deposit, as well as commercial checking accounts, lockbox accounts, cash concentration accounts, and other treasury management products.
The big losses should be behind us
TCBI reported some monster losses in June 2010, an EPS loss of $12 per share and in September 2010 with a loss of $49.20 per share. The market expected these losses as the stock moved up 3% following the June 2010 report and lost 2% following the September 2010 report.
By March of 2011, EPS had swung back from big losses and posted a 200% surprise as the company reported EPS of $0.18 compared to an $0.18 loss that analysts were expecting. Once again, the stock saw little reaction to this report as well, moving lower by 1%.
Earnings continue to climb
The last four reports have seen EPS growth, something that aggressive growth investors need to see. The gain in March 2011 was followed up by a $0.20 report for June, a $0.28 gain in September and a $0.29 mark for December. The December quarter came in a little light of expectations, but earnings are moving in the right direction.
Looking Forward
Estimates for 2012 and 2013 have moved higher. In October 2011, analysts were expecting EPS for 2012 to be $0.69. Positive earnings revisions have moved that number higher to $0.87. Similarly, 2013 expectations have moved from $0.60 to $1.07 over the same time period.
TCBI has a somewhat pricey valuation picture. The stock trades at discount to trailing earnings, and a premium to forward earnings. The price to book metric carries a slight premium while price to sales really stands out. The 3.1x price to sales multiple is more than double the 1.5x industry average and signifies the high expectations investors have for this stock.
The Chart
The six month chart for TCBI shows just what an aggressive growth investor is looking for. The stock is trading well above the 200 day moving average and has not even attempted to retrace back to that important technical indicator. TCBI is a Zacks #1 Rank (Strong Buy).
Brian Bolan is the Aggressive Growth Stock Strategist for Zacks.com. He is also the Editor in charge of the Zacks Home Run Investor service
