In our last Number Cruncher we discussed how EQB Inc. (EQB:TSX), Bank of Nova Scotia (BNS:TSX) & Canadian Western Bank (CWB:TSX) are undervalued lenders with reasonable quality.
Let’s Begin with EQB Inc:
EQB Inc. (EQB:TSX)’s SP Score has risen by 5 points to 75 in the last 90 days, comprising a Performance Score of 71.9 and a Risk Score of 15.6. Specifically, EQB excels in Value (82), Quality (75), and Growth and Momentum (74 each). The company has surged ahead with a 100.7% annual, substantially outpacing its 5-year average of 30.0%.
Meanwhile, EQB sustains an 8.9% EPS growth rate last year, closely aligned with its 5-year average of 16.5%. NOPAT and EVA have both increased at a faster rate than EQB’s stock price. Conversely, the Future Growth Value (FGV) metric has recently entered negative territory, suggesting declining future expectations.
While the stock price has closely followed NOPAT from below, it’s worth noting that all the above-mentioned indicators have been consistently growing since 2019.
Bank of Nova Scotia
The Bank of Nova Scotia (BNS:TSX) currently has an SP Score of 62, a one-point decline over the past 90 days. This score is based on a Performance Score of 54.6 and a Risk Score of 15.7. The bank saw an impressive 59.0% increase in annual sales this year, far exceeding its 5-year average growth of 13.0%. However, its earnings per share (EPS) fell by 23.2% this year, dragging its 5-year average EPS down to just 1.2%. The bank performs exceptionally well in three key areas: Value, with a score of 75; Quality, scoring 64; and Yield, also at 64.
EVA, NOPAT, and the stock price have been dropping in the 4 latest quarters. However, the price declined has been larger than the NOPAT. Since Q2 2022, the price dropped more than 25% while the NOPAT decreased 20% suggesting that the current price could be oversold if the NOPAT stop deteriorating in the next quarters.
Turning our attention to Future Growth Value (FGV), the stock’s expectations have also been trending downward in in the last quarter, aligned with the decline in actual operating value.
Canadian Western Bank
CWB (CWB:TSX) ‘s SP Score stands at 61, marking a marginal one-point decrease over the past 90 days. The score is bolstered by a Performance Rating of 54.9 and a Risk Score of 18.4. CWB leads in Value (84), Quality (72), and Yield (69).
A 51.7% sales growth rate eclipses its 5-year average of 14.5%. On the downside, CWB’s EPS has contracted by 10.5% this year, deviating from its 5-year average growth rate of 3.0%. The current dividend yield sits at a respectable 4.9%.
the EVA has experienced a consistent, linear decline over the past five quarters. This downturn has been accompanied by fluctuations in the stock price, which seem to intertwine with the declining EVA in a complex dance. These intertwined movements should serve as a cautionary note for investors, as the stock has demonstrated increased volatility compared to previous quarters.
If you have any questions about the article, feel free to contact Anthony :
amenard@inovestor.com
