On Thursday, Stephens initiated coverage on FB Financial (NYSE: NYSE:FBK) stock, assigning an Overweight rating.
The firm highlighted the company's improved financial position, noting a "de-risked balance sheet" due to Construction and Commercial Real Estate (CRE) balances nearing targeted concentrations. Additionally, a reduced expense base is expected to contribute to positive operating leverage throughout the forecast period.
FB Financial's infrastructure is seen as capable of supporting further economies of scale, positioning the bank to potentially accelerate its organic growth rate from mid-single digits to a low-double-digit range, which is traditionally above its peers.
Amidst ongoing economic uncertainty, the company's conservative approach is underscored by its above-peer capital ratios, with a tangible common equity (TCE) ratio of 10%, and reserves, with an allowance for credit losses (ACL) at 1.63%.
The firm anticipates that FB Financial's return on assets (ROA) and pre-provision net revenue return on average assets (PPNR ROAA) outlooks will justify a premium valuation on earnings per share (EPS).
Stephens also sees potential for multiple expansion based on price to tangible book value (P/TBV) relative to normalized return on tangible common equity (ROTCE), with associated returns also surpassing those of peers.
With the stock's potential to achieve a 14% increase to reach the $45 price target, Stephens has upgraded FB Financial from Equal-Weight to Overweight. The upgrade reflects confidence in the company's ability to deliver above-peer financial performance and the potential for valuation expansion.
InvestingPro Insights
FB Financial (NYSE: FBK) has been recognized for its strong financial discipline and potential for growth. In line with this, InvestingPro Tips indicate that the company has a history of increasing its dividends, with a track record of raising them for 6 consecutive years. This commitment to shareholder returns, alongside analysts' predictions that the company will remain profitable this year, suggests a stable financial outlook.
From a data perspective, FB Financial boasts a market capitalization of approximately $1.79 billion and a Price/Earnings (P/E) ratio of 15.99, which slightly adjusts to 16.03 when considering the last twelve months as of Q1 2024. Despite a challenging revenue growth environment, with a -9.04% change over the last twelve months as of Q1 2024, the company maintains a robust operating income margin of 31.17%. Additionally, the dividend yield stands at 1.78%, reflecting a 13.33% growth in dividends over the same period, which is a testament to the company's ability to generate and return value to its shareholders.
For investors looking to delve deeper into FB Financial's performance and strategic positioning, there are additional InvestingPro Tips available. These tips provide further insights that could be pivotal in making informed investment decisions. To access these tips and to take advantage of a special offer, use coupon code PRONEWS24 for an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro. With this resource, investors can stay ahead of market trends and gain a comprehensive understanding of FB Financial's potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.