On Monday, Home Bancorp , Inc. (NASDAQ:HBCP) received an upgrade in its stock rating by Raymond James from Market Perform to Outperform. Accompanying the upgrade is a new price target set at $50.00. This positive shift comes after Home Bancorp's third-quarter results of 2024 surpassed expectations in terms of earnings per share (EPS) and pre-provision net revenue (PPNR).
The upgrade reflects Raymond James' increased confidence in Home Bancorp's performance, citing its profitability levels that stand above its peers. The firm now expects the bank to consistently achieve a return on assets (ROA) of more than 1.0% in the coming years. Furthermore, the bank's credit quality has shown improvement, with a decline in criticized loans over the past two quarters, boasting a criticized loan ratio of 1.39%, which is favorable compared to the peer median of 2.17%.
Raymond James also highlighted Home Bancorp's healthy reserve levels, with a loan loss reserve (LLR) of 1.21%, slightly above the peer median of 1.17%. Although industry loan growth has experienced a slowdown, the firm believes Home Bancorp possesses an inherent strength. The bank is expected to leverage its deposits from more rural areas in Louisiana to support growth in the faster-growing Houston market, where it has seen a significant annual loan growth rate of 16%.
The analyst pointed out that despite the year-to-date underperformance of Home Bancorp's stock, which increased by 6.3% compared to the regional banking index KRE's 13.4% rise, the bank's steep discount to peers on price-to-earnings (P/E) and tangible book value (TBV) metrics is unjustified. The firm anticipates that the stock has the potential to rise from its current levels in light of these observations.
In other recent news, Home Bancorp reported a net income of $9.4 million, or $1.18 per share, for the third quarter of 2024, marking an increase from the previous quarter. The bank's net interest margin expanded, and return on assets improved, despite subdued loan growth due to a significant paydown of a $19 million medical C&I loan. Deposits increased by $55 million, led by money market and interest-bearing checking accounts. CEO John Bordelon and CFO David Kirkley also shared insights on the bank's strategies in light of potential interest rate cuts.
Furthermore, Home Bancorp repurchased 24,000 shares at $38.50 each and raised its dividend to $0.26 per share. Non-performing loans saw a slight increase to 0.68% of total loans. Non-interest income fell to $3.7 million, while expenses rose to $22.3 million. Management expressed optimism about future loan demand, particularly in the mortgage sector, if rate cuts occur.
InvestingPro Insights
Building on Raymond James' positive outlook for Home Bancorp, Inc. (NASDAQ:HBCP), recent data from InvestingPro provides additional context to the company's financial position and market performance. As of the last twelve months ending Q3 2024, Home Bancorp reported a revenue of $130.22 million USD, with an impressive operating income margin of 37.16%. This aligns with Raymond James' assessment of the bank's above-peer profitability levels.
The stock's current P/E ratio of 9.96 and price-to-book ratio of 0.92 suggest that Home Bancorp may indeed be undervalued, supporting Raymond James' view that the current discount is unjustified. Moreover, the stock has shown strong momentum, with a 25.99% price total return over the past six months and a 37.4% return over the last year, indicating growing investor confidence.
InvestingPro Tips highlight that Home Bancorp has raised its dividend for 11 consecutive years, demonstrating a commitment to shareholder returns. This consistent dividend growth, coupled with the stock trading near its 52-week high, reinforces the positive sentiment expressed in the Raymond James upgrade.
For investors seeking a deeper analysis, InvestingPro offers 8 additional tips for Home Bancorp, providing a more comprehensive view of the company's prospects and potential risks.
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