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Here's Why Washington Federal (WAFD) Stock is Worth Buying
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With the Federal Reserve expected to raise interest rates a number of times this year to control inflation, investors can bet on bank stocks right now. One such bank – Washington Federal, Inc. (WAFD - Free Report) – is worth betting on.
The company remains on track for organic growth, supported by the rise in loans and deposit balances. Also, WAFD’s efficient capital deployments indicate a solid balance sheet and liquidity position.
The Zacks Consensus Estimate for earnings has remained unchanged for both fiscal 2022 and fiscal 2023 over the past seven days. Washington Federal currently carries a Zacks Rank #2 (Buy).
Similar to other companies in the banking industry, shares of WAFD haven’t remained untouched by the current sell-off in the broader markets. The company’s shares have lost 12.1% in the past three months compared with an 18.9% decline recorded by the industry. This makes an attractive entry point for investors.
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Reasons Why Washington Federal is an Attractive Pick
Earnings Growth: Over the past three to five years, Washington Federal witnessed earnings growth of 2.4%. The company’s earnings are expected to display an upswing in the near term as its projected earnings growth is 28% for fiscal 2022 and 13.6% for fiscal 2023.
Additionally, WAFD has an impressive earnings surprise history. It pulled off an earnings surprise of 8.27% in the trailing four quarters.
Revenue Strength: Washington Federal continues to make steady progress toward improving its top line. The company’s revenues witnessed a CAGR of 3.5% over the last six fiscal years (2016-2021). The upswing was largely driven by improving net loan balances, which saw a CAGR of 6.9% over the same time frame.
Revenues and loans increased in the first half of fiscal 2022 as well. Given the robust loan demand and solid economic growth, the company’s top line is expected to improve in the quarters ahead.
WAFD’s fiscal 2022 revenues are projected to grow 10.8%, whereas fiscal 2023 revenues will likely rise 12.3%.
Solid Balance Sheet: As of Mar 31, 2022, WAFD had total debt of $1.72 billion and cash and cash equivalents worth $1.95 billion. Its times interest earned ratio of 8.4 at the end of second-quarter fiscal 2022 reflects sequential improvement. Thus, given the company’s decent earnings strength, it is expected to continue meeting debt obligations in the near term, even if the economic situation worsens.
Steady Capital Deployment: Washington Federal’s strong balance-sheet position has enabled it to increase dividends every year since 2011 (the last one was announced in January 2022). In addition, the company has its share-repurchase program in place. As of Mar 31, 2022, it had the authorization to repurchase around 3.73 million shares. Driven by earnings strength and strong liquidity position, the company’s capital-deployment activities look sustainable.
Favorable Valuation: Washington Federal stock looks undervalued when compared with the broader industry. Its price/earnings and price/book ratios are below the respective industry averages. OZK has a P/E (F1) ratio of 10.30 compared with the industry average of 10.35. Its P/B ratio stands at 1.10, below the industry’s 1.17.
Also, the stock has a Value Score of B. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
The Zacks Consensus Estimate for Comerica’s current-year earnings has been revised 5.2% upward over the past 30 days. CMA’s shares have lost 13.5% in the year-to-date period.
East West Bancorp recorded a 2.9% upward earnings estimate revision for 2022 over the past 30 days. The EWBC stock has lost 11.2% so far this year.
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Here's Why Washington Federal (WAFD) Stock is Worth Buying
With the Federal Reserve expected to raise interest rates a number of times this year to control inflation, investors can bet on bank stocks right now. One such bank – Washington Federal, Inc. (WAFD - Free Report) – is worth betting on.
The company remains on track for organic growth, supported by the rise in loans and deposit balances. Also, WAFD’s efficient capital deployments indicate a solid balance sheet and liquidity position.
The Zacks Consensus Estimate for earnings has remained unchanged for both fiscal 2022 and fiscal 2023 over the past seven days. Washington Federal currently carries a Zacks Rank #2 (Buy).
Similar to other companies in the banking industry, shares of WAFD haven’t remained untouched by the current sell-off in the broader markets. The company’s shares have lost 12.1% in the past three months compared with an 18.9% decline recorded by the industry. This makes an attractive entry point for investors.
Image Source: Zacks Investment Research
Reasons Why Washington Federal is an Attractive Pick
Earnings Growth: Over the past three to five years, Washington Federal witnessed earnings growth of 2.4%. The company’s earnings are expected to display an upswing in the near term as its projected earnings growth is 28% for fiscal 2022 and 13.6% for fiscal 2023.
Additionally, WAFD has an impressive earnings surprise history. It pulled off an earnings surprise of 8.27% in the trailing four quarters.
Revenue Strength: Washington Federal continues to make steady progress toward improving its top line. The company’s revenues witnessed a CAGR of 3.5% over the last six fiscal years (2016-2021). The upswing was largely driven by improving net loan balances, which saw a CAGR of 6.9% over the same time frame.
Revenues and loans increased in the first half of fiscal 2022 as well. Given the robust loan demand and solid economic growth, the company’s top line is expected to improve in the quarters ahead.
WAFD’s fiscal 2022 revenues are projected to grow 10.8%, whereas fiscal 2023 revenues will likely rise 12.3%.
Solid Balance Sheet: As of Mar 31, 2022, WAFD had total debt of $1.72 billion and cash and cash equivalents worth $1.95 billion. Its times interest earned ratio of 8.4 at the end of second-quarter fiscal 2022 reflects sequential improvement. Thus, given the company’s decent earnings strength, it is expected to continue meeting debt obligations in the near term, even if the economic situation worsens.
Steady Capital Deployment: Washington Federal’s strong balance-sheet position has enabled it to increase dividends every year since 2011 (the last one was announced in January 2022). In addition, the company has its share-repurchase program in place. As of Mar 31, 2022, it had the authorization to repurchase around 3.73 million shares. Driven by earnings strength and strong liquidity position, the company’s capital-deployment activities look sustainable.
Favorable Valuation: Washington Federal stock looks undervalued when compared with the broader industry. Its price/earnings and price/book ratios are below the respective industry averages. OZK has a P/E (F1) ratio of 10.30 compared with the industry average of 10.35. Its P/B ratio stands at 1.10, below the industry’s 1.17.
Also, the stock has a Value Score of B. Our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Bank Stocks Worth Considering
A couple of other top-ranked bank stocks are Comerica (CMA - Free Report) and East West Bancorp, Inc. (EWBC - Free Report) . CMA sports a Zacks Rank of 1, while EWBC carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Comerica’s current-year earnings has been revised 5.2% upward over the past 30 days. CMA’s shares have lost 13.5% in the year-to-date period.
East West Bancorp recorded a 2.9% upward earnings estimate revision for 2022 over the past 30 days. The EWBC stock has lost 11.2% so far this year.