Top Picks 2017: Preferred Bank

01/19/2017 7:00 am EST


Richard Moroney

Editor, Dow Theory Forecasts

This small cap Top Pick is a regional bank based in California that boasts strong scores in our Quadrix ranking system for operating momentum and share-price action, notes Richard Moroney, editor of Upside.

Preferred Bank (PFBC) has surged 54% in the past year but still trades at a modest discount to the median S&P 1500 regional bank, based on both trailing earnings and estimated 2017 profits.

Regional banks have coped with unusually low interest rates since the financial meltdown and are now positioned to benefit from the Federal Reserve’s plan to ramp its pace of rate hikes in 2017.

Even in a low-rate environment, Preferred Bank has generated robust growth, with annual per share profits up in five of the past six years and annual revenue up in five consecutive years.

For the first nine months of 2016, Preferred Bank delivered 16% higher profits and 29% higher revenue, as an expanding deposit base helped the bank increase its loan portfolio.

Per share profits are projected to climb 12% in 2017, ahead of its industry median of 9% growth. Analyst estimates have steadily climbed higher over the past 90 days.

On Dec. 23, Preferred Bank announced a 20% increase in its quarterly dividend to $0.18 per share, payable in January. Preferred Bank, with an Overall rank of 96, is rated a “Best Buy”.

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