Given the melt-up in bank stocks, I think it's wise to
be skeptical if not downright suspicious when a bank screens as
undervalued. In the case of Wells Fargo (NYSE:WFC),
for instance, there's the bank's well-publicized fraudulent account
issue to explain the discount, and in a few cases here and there
investors can find smaller banks trading at a discount in large part
because they're below the radar screen of most analysts and investors.
To be sure, my growth expectations for Pacific Premier Bancorp (NASDAQ:PPBI)
aren't conservative, but I do believe the bank could double its
adjusted earnings between 2017 and 2020/2021 and double them again over
the ensuing five years. I like this bank's leverage to "prudently
aggressive" lending and its stated desire to deploy surplus capital into
M&A to further grow the business. While the shares are expensive on
a tangible book basis (at least on the basis of what has normally been
reasonable for the bank's ROTCE), there could be upside into the $40's
as this bank's lending continues to outgrow its peers and it continues
to improve its deposit base.
Read more here:
Pacific Premier Bancorp Seems To Be Living Up To Its Name
