Zions Bancorp: Weak PPOP Prospects Masking An Increasingly Interesting Valuation

 One of my core investment principles is that valuation is not a driver - "cheap" stocks don't go up just because they're cheap, and likewise expensive stocks don't go down just because they're expensive. Zions Bancorp (ZION) is getting cheaper and cheaper, and I do believe that the Street is overlooking the significant changes management has made to the business over the last decade, but the market usually only believes credit improvement stories at the end of a cycle and Zion's pre-provision profit (or PPOP) growth prospects over the next few years are not very good. I wrote previously that I didn't think Zions was set up to perform well, and the shares have fallen another 10% since then, underperforming the peer group. The prospective returns are getting pretty attractive now, but I do still worry that weak growth leverage over the next few years will remain a headwind to share price appreciation.

 

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Zions Bancorp: Weak PPOP Prospects Masking An Increasingly Interesting Valuation