Northwest Bancshares Inc (NASDAQ:NWBI), a US$1.67B small-cap, is a financial services company operating in an industry, which is impacted by macroeconomic factors such as interest rate changes and inflation. House price index and the stock market rebound are also indicators of higher consumer and business appetite for credit. Financial services analysts are forecasting for the entire industry, a highly optimistic growth of 32.47% in the upcoming year . Is now the right time to pick up some shares in mortgage and thrift companies? Today, I will analyse the industry outlook, as well as evaluate whether Northwest Bancshares is lagging or leading its competitors in the industry. See our latest analysis for Northwest Bancshares
What’s the catalyst for Northwest Bancshares’s sector growth?
NasdaqGS:NWBI Past Future Earnings Apr 7th 18 The mortgage industry is characterized by stable product offerings, consolidation and increasing levels of external competition. In the past year, the industry delivered growth of 0.78%, though still underperforming the wider US stock market. Northwest Bancshares leads the pack with its impressive earnings growth of 87.23% over the past year. However, analysts are not expecting this industry-beating trend to continue, with future growth expected to be 9.43% compared to the wider mortgage and thrifts sector growth hovering in the thirties next year. As a future industry laggard in growth, Northwest Bancshares may be a cheaper stock relative to its peers.
Is Northwest Bancshares and the sector relatively cheap?
NasdaqGS:NWBI PE PEG Gauge Apr 7th 18 The mortgage and thrifts sector’s PE is currently hovering around 22.48x, relatively similar to the rest of the US stock market PE of 18.13x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 4.99% compared to the market’s 10.60%, potentially indicative of past headwinds. On the stock-level, Northwest Bancshares is trading at a lower PE ratio of 17.44x, making it cheaper than the average mortgage and thrifts stock. In terms of returns, Northwest Bancshares generated 7.82% in the past year, which is 2.83% over the mortgage and thrifts sector.
Northwest Bancshares is a mortgage and thrifts industry laggard in terms of its future growth outlook. This is possibly reflected in the PE ratio, with the stock trading below its peers. If the stock has been on your watchlist for a while, now may be the time to dig deeper. Although the market is expecting lower growth for the company relative to its peers, Northwest Bancshares is also trading at a discount, meaning that there could be some value from a potential mispricing. However, before you make a decision on the stock, I suggest you look at Northwest Bancshares’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has NWBI’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of Northwest Bancshares? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
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