Yahoo Finance Is EQB Stock a Buy in March 2023?
Written by Ambrose O'Callaghan at The Motley Fool Canada
EQB (TSX:EQB) is a Toronto-based company that provides personal and commercial banking services to retail and commercial customers across Canada. This bank is overshadowed by the Big Six Canadian bank stocks. However, it has carved out a nice slice for itself on the back of its mortgage lending business and EQ Bank. The bank is notable for offering a high-interest savings account that was much more attractive than the average offering from one of the Big Six.
Today, I want to discuss whether EQB is worth buying right now. Will the stock succumb to the market forces that have stirred volatility in recent months? Or will investors be looking at a brighter investing world in the quarters ahead? Let’s jump in.
Here’s why EQB stock has struggled over the past year…
Shares of EQB stock have dropped 17% year over year as of close on March 10. The stock has jumped 7.5% so far in 2023. EQB’s connection the Canada housing market and the looming threat of higher interest rates. Indeed, Canadian real estate has taken a major hit over the past year.
In February 2023, Toronto-area home prices were down 18% compared to February 2022. Meanwhile, the number of property sales were halved compared to the prior year. The Toronto Regional Real Estate Board (TRREB) attributed this decline to higher borrowing costs that have come about due to the aggressive interest rate-tightening policy pursued by the Bank of Canada (BoC).
That said, investors should not be in panic mode. The COVID-19 pandemic sparked a dip in interest rates that led to a massive upswing in major Canadian real estate markets. This represents a correction in that radical rise. EQB and its peers still have a nice cushion after gorging on cheap credit since the beginning of 2020.
How will Canada’s housing market look in 2024?
The BoC’s aggressive interest rate hikes have paid off to some degree, as we approach the final days of the 2022-2023 winter season. Canada’s inflation rate cooled to 5.7% in the month of February. That was a solid improvement from the 6-8% rates we have seen since March 2022. However, it is still far off from the BoC’s 2% inflation target. That means investors may have to get used to high interest rates in the near term.
Earlier this month, Royal Bank analyst Robert Hogue stated that the bottom of the Canadian housing market downturn was in sight. Hogue predicted that the recovery phase should pick up gradually by the beginning of 2024. Meanwhile, record immigration levels and low supply will maintain very strong demand in the overall market. That means early 2024 could be a great buy-in time for opportunistic investors.
EQB stock: Will it be a stronger buy in a year’s time?
This company released its fourth quarter (Q4) and full-year fiscal 2022 earnings on February 16, 2023. EQB posted adjusted diluted earnings per share (EPS) of $2.46 in Q4 2022 — up 7% from the previous year. Moreover, adjusted diluted EPS reached $9.17 for the full year, which represented 9% growth. EQ Bank achieved customer growth of 23% year over year to 308,286 and reported 14% growth in deposits to $7.9 billion.
Shares of EQB currently possess a very favourable price-to-earnings ratio of 8.1. It is trading in more attractive value territory compared to its industry peers. The stock offers a quarterly dividend of $0.35 per share. That represents a 2.2% yield.
A turbulent real estate market has failed to cast a dark shadow over EQB. On the contrary, the bank put together a strong fiscal 2022 in the face of a challenging climate. This is a stock I’m still bullish on at the time of this writing.
The post Is EQB Stock a Buy in March 2023? appeared first on The Motley Fool Canada.
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Fool contributor Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends EQB. The Motley Fool has a disclosure policy.
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