With the recent release of its first quarter 2013 results, Home Bancorp (HBCP, Financial) showed that it was still one of the mortgage stocks that investors should keep in their portfolios. According to the report, its loan portfolio for the quarter ended March 31, 2013, totaled $678.6 million, a slight increase of $5.5 million from the previous quarter. The modest growth was attributed to the increase in commercial and industrial loans and in the one- to four-family first mortgages sector, which was offset by paydowns and maturities in the other loan portfolio segments.
HBCP is the holding company for community financial institution Home Bank, which is based in Louisiana and serves the needs of the community in New Orleans, Baton Rouge, Lafayette and the surrounding areas. Home Bank is a federally-chartered savings bank that provides a range of deposit products including interest-bearing and non-interest bearing savings and checking accounts as well as money market and certificates of deposit. In addition, it also offers a variety of loan products such as single family residential and commercial real estate loans as well as home equity loans and lines of credit and commercial loans.
Positive Fundamentals
The company has been ranked a moderate buy by analysts for its positive fundamentals, such as its earnings growth of 19 percent. These measures include:
Yield-adjusted Price/Earnings to Growth (PEG) Ratio. The PEG ratio is used to determine the value of a stock while taking the earnings growth of the issuing company into account and is considered a more accurate measure than the P/E ratio. The lower the PEG ratio, the more the stock may be undervalued in the context of its earnings performance. The PEG ratio of HBCP is 0.76, which is acceptable based on the average growth rates of the three, four and five year historical earnings per share. HBCP’s EPS is $1.26.
Equity/Assets Ratio
This is a measure of the company’s health that is preferred over the usual debt/equity ratio. A high E/A ratio mean that the company has been enjoying good growth relative to its asset base. HBCP’s equity/assets ratio is 15%, which is not only above the minimum 5% but also considered very healthy.
Net Cash Position
Net cash is defined as the amount of cash and marketable securities a company has on hand less its total long term debt. This is used to compute the Net Cash/Price ratio, a measure of the equity value of a particular company by comparing the amount of cash flow it is generated relative to its stock value. The ratio is 31.1% based on its May 10 closing stock price of $18.18.
Long-Term Earnings per Share
This measure looks at this historic growth rate of the company’s earnings per share, adjusted for inflation. HBCP’s current long-term inflation-adjusted earnings per share are 16.8%, which is higher than the 15% benchmark set for this indicator.
Three-Year Average Net Profit Margin
This is a measure of profitability and is computed by dividing net income by revenues. HBCP’s average is 15.73%, higher than the 5% benchmark.
Free Cash per Share
This measures how much cash a company has per share of stock. When this measure is high, it indicates that a company has enough cash to sustain itself through three years of losses. The free cash per share of HSBC is $1.17, which indicates it has sufficient cash.
Total Debt/Equity Ratio
This is a measure of how the company has used debt to finance its growth. If this ratio is high, it indicates that the company has been aggressive in pursuing growth using external financing, which can result in volatile earnings. HBCP’s debt/equity ratio is 7.1%, which is acceptable.
The Bottom Line
While Home Bancorp has a passing grade on many of the indicators that analysts use to decide whether a stock is worth buying or not, it is not a must-buy. But there is also no reason for investors to dump this stock since there is no indicator that it is set to lose value any time soon. In fact, with the conservative strategy adopted by its management, it could actually continue to grow modestly over the long term. And analysts have actually given it a ‘buy’ recommendation. So there is no reason why investors should not continue to maintain HBCP as part of their long-term portfolio.
HBCP is the holding company for community financial institution Home Bank, which is based in Louisiana and serves the needs of the community in New Orleans, Baton Rouge, Lafayette and the surrounding areas. Home Bank is a federally-chartered savings bank that provides a range of deposit products including interest-bearing and non-interest bearing savings and checking accounts as well as money market and certificates of deposit. In addition, it also offers a variety of loan products such as single family residential and commercial real estate loans as well as home equity loans and lines of credit and commercial loans.
Positive Fundamentals
The company has been ranked a moderate buy by analysts for its positive fundamentals, such as its earnings growth of 19 percent. These measures include:
Yield-adjusted Price/Earnings to Growth (PEG) Ratio. The PEG ratio is used to determine the value of a stock while taking the earnings growth of the issuing company into account and is considered a more accurate measure than the P/E ratio. The lower the PEG ratio, the more the stock may be undervalued in the context of its earnings performance. The PEG ratio of HBCP is 0.76, which is acceptable based on the average growth rates of the three, four and five year historical earnings per share. HBCP’s EPS is $1.26.
Equity/Assets Ratio
This is a measure of the company’s health that is preferred over the usual debt/equity ratio. A high E/A ratio mean that the company has been enjoying good growth relative to its asset base. HBCP’s equity/assets ratio is 15%, which is not only above the minimum 5% but also considered very healthy.
Net Cash Position
Net cash is defined as the amount of cash and marketable securities a company has on hand less its total long term debt. This is used to compute the Net Cash/Price ratio, a measure of the equity value of a particular company by comparing the amount of cash flow it is generated relative to its stock value. The ratio is 31.1% based on its May 10 closing stock price of $18.18.
Long-Term Earnings per Share
This measure looks at this historic growth rate of the company’s earnings per share, adjusted for inflation. HBCP’s current long-term inflation-adjusted earnings per share are 16.8%, which is higher than the 15% benchmark set for this indicator.
Three-Year Average Net Profit Margin
This is a measure of profitability and is computed by dividing net income by revenues. HBCP’s average is 15.73%, higher than the 5% benchmark.
Free Cash per Share
This measures how much cash a company has per share of stock. When this measure is high, it indicates that a company has enough cash to sustain itself through three years of losses. The free cash per share of HSBC is $1.17, which indicates it has sufficient cash.
Total Debt/Equity Ratio
This is a measure of how the company has used debt to finance its growth. If this ratio is high, it indicates that the company has been aggressive in pursuing growth using external financing, which can result in volatile earnings. HBCP’s debt/equity ratio is 7.1%, which is acceptable.
The Bottom Line
While Home Bancorp has a passing grade on many of the indicators that analysts use to decide whether a stock is worth buying or not, it is not a must-buy. But there is also no reason for investors to dump this stock since there is no indicator that it is set to lose value any time soon. In fact, with the conservative strategy adopted by its management, it could actually continue to grow modestly over the long term. And analysts have actually given it a ‘buy’ recommendation. So there is no reason why investors should not continue to maintain HBCP as part of their long-term portfolio.
