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Why is BancorpSouth (BXS) Stock a Potential Pick Right Now?

BancorpSouth, Inc. BXS 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 BancorpSouth, 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 $14.7 billion in assets as of Dec 31, 2016, BancorpSouth’s strengths include growth through inorganic routes, cost-control initiatives and steady capital deployment activities.

9 Reasons Why BancorpSouth is a Golden Egg  

Earnings Strength: BancorpSouth witnessed historical (3–5 years) earnings per share growth of 5.75% compared with 10.16% growth recorded by the industry. In addition, the company’s estimated long-term EPS growth rate of 8.57% promises rewards for investors.

Revenue Growth: BancorpSouth continues to make steady progress toward improving its top line, with sales recording 3-year compounded annual growth rate (‘CAGR’) of around 2.9% during 2014–2016. Further, the company’s projected sales growth (F1/F0) of 5.83% (as against the industry average of about 2.89%) indicates constant upward momentum in revenues.

Strategic Deals: BancorpSouth has been making strategic investments through mergers and acquisitions (M&A). Following the acquisition of the assets of GEM Insurance Agencies, LP, in Dec 2013, the company again struck two cash-cum-stock merger deals in Jan 2014 and an asset acquisition deal in Apr 2014. Also, recently, it acquired certain assets in Waguespack, an independent insurance firm in Louisiana.

Prudent Expense Management: BancorpSouth’s non-interest expenses declined at a 5-year CAGR of around 1% during 2012–2016, though one-time legal settlement charge escalated expenses in 2015. The company is expected to witness downward trend in expenses, moving ahead, as it remains focused on trimming headcounts.

Leverage: BancorpSouth’s debt/equity ratio stands at 0.31 against the S&P 500 average of 0.70, reflecting lower debt burden compared with the industry. It highlights the company’s sound financial flexibility.

Steady Capital Deployment: BancorpSouth’s ability to generate positive cash flows and enhance shareholders’ value through regular dividend payments, and share repurchases is commendable. Notably, in Jul 2016, the company raised its quarterly cash dividend by 25%. Further, in Jan 2016, BancorpSouth announced a share repurchase program of approximately 7 million shares of its outstanding common stock through Dec 2017.

Favorable Zacks Rank: BancorpSouth currently carries a Zacks Rank #2 (Buy). This has been supported by stable earnings estimates over the last 30 days. For 2017 and 2018, the Zacks Consensus Estimate remained unchanged at $1.63 and $1.90, respectively.

Stock is Undervalued: BancorpSouth has a P/B ratio of 1.67x compared to the S&P 500 average of 3.24x. Based on this ratio, the stock seems undervalued.

Share Price Movement: BancorpSouth’s shares gained 27.3% over the last six months compared with 27.7% 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 39% 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.

Northern Trust Corporation NTRS has been witnessing upward estimate revisions for the last 30 days, with the company’s shares rising nearly 19.9% 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 30 days. Over the last six months, the company’s share price has been up more than 46%. It also carries a Zacks Rank #2.

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Comerica Incorporated (CMA): Free Stock Analysis Report
 
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