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6 Reasons You Should Invest in Bank OZK (OZK) Stock Right Now

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Bank OZK (OZK - Free Report) is well-positioned for top-line growth, supported by its business restructuring and branch consolidation initiatives. The company’s solid loan balance, along with higher interest rates, will keep aiding growth. Thus, it seems to be a wise idea to add the stock to your portfolio now.

Analysts also seem bullish on the stock. The Zacks Consensus Estimate for OZK’s current-year earnings has been revised 1.2% upward over the past 30 days. Thus, the stock currently sports a Zacks Rank #1 (Strong Buy).

Looking at its price performance, Bank OZK’s shares have gained 6.5% over the past year against a decline of 13.8% for the industry.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

Factors That Make Bank OZK a Solid Bet Right Now

Earnings Strength: Bank OZK’s earnings witnessed growth of 8.7% over the last three to five years, driven by a solid top-line performance and strategic buyouts. The company’s earnings are projected to grow 29.7% in 2023 and 1.7% in 2024, reflecting the continuation of the upward trend in earnings.

The company also has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in three of the trailing four quarters.

Revenue Growth: Bank OZK has grown substantially through de novo branching strategy and inorganically. Its revenues witnessed a compound annual growth rate of 8.2% over the last four years (2019-2022), mainly driven by steady loan growth and a rise in fee income. Given its strong balance sheet position, the bank is expected to continue expanding through acquisitions.

For 2023, the company’s revenues are expected to rise 19.7%, whereas, for 2024, it is projected to grow 3.1%.

Solid Balance Sheet: As of Dec 31, 2022, the company had total debt of $953.6 million, and cash and cash equivalents of $1.03 billion. Thus, given a robust liquidity position and decent earnings strength, Bank OZK is expected to continue to meet debt obligations in the near term, even if the economic situation worsens.

Impressive Capital Deployments: Bank OZK has been regularly increasing its quarterly dividend. In January 2023, it hiked its dividend for the 50th consecutive quarter. The company has a share repurchase plan. In November 2022, it announced a new buyback program under which it is authorized to repurchase up to $300 million worth of shares. As of Dec 31, 2022, the plan (set to expire on Nov 9, 2023) had $284.9 million authorization remaining.

Given a robust capital position and lower debt-equity and dividend payout ratios than peers, the company is expected to sustain its capital deployment activities.

Favorable Valuation: The Bank OZK stock looks undervalued when compared with the broader industry. Its price/earnings and price/cash flow ratios are below the industry averages. OZK has a P/E (F1) ratio of 7.48 compared with the industry average of 9.27. Its P/CF ratio stands at 8.16, below the industry’s 8.64.

Superior Return on Equity (ROE): Bank OZK’s trailing 12-month ROE reflects its superiority in terms of utilizing shareholder funds compared with its peers. The company has an ROE of 13.13%, higher than the industry average of 12.41%.

Other Stocks Worth a Look

A couple of other top-ranked stocks from the finance space are The Bank of New York Mellon Corporation (BK - Free Report) and Interactive Brokers Group, Inc. (IBKR - Free Report) . Both BK and IBKR currently sport a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for BK’s current-year earnings has increased 1.9% over the past 30 days. The company’s share price has increased 21% over the past six months.

IBKR’s 2023 earnings estimates have been revised 1.3% upward over the past 30 days. Over the past six months, IBKR’s shares have rallied 34.3%.


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The Bank of New York Mellon Corporation (BK) - free report >>

Interactive Brokers Group, Inc. (IBKR) - free report >>

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