Photo credit: www.investing.com
Piper Sandler has revised its outlook on Veritex Holdings (NASDAQ: VBTX), raising the price target from $27 to $30 while maintaining an Overweight rating for the stock.
This update comes after a positive trading day for Veritex shares, which significantly outperformed the broader market index.
The firm’s analyst noted several encouraging trends for the bank, including better credit developments and a decrease in commercial real estate exposure, with the risk-based capital ratio improving to approximately 302%, down from 320%.
Furthermore, Veritex has seen a rise in deposits, largely due to an increase in non-interest bearing deposits (NIBDs) and interest-bearing transaction accounts; however, there was a decline in brokered and public funds.
During the recent quarter, Veritex made a strategic decision to sell a student housing property loan, with management attributing the positive credit trends to proactive surveillance initiatives. The shift in account types has also contributed to deposit growth.
The new price target of $30 corresponds to roughly 1.3 times the anticipated tangible book value per share (TBVPS) for the upcoming year. This represents a shift from the previous valuation model, which was based on around 12 times the estimated 2025 earnings.
In addition to these developments, Veritex Holdings reported strong results for the third quarter of 2024, achieving operating earnings of $32.2 million and pretax pre-provision earnings of $44.6 million. While total loans saw a decrease, revenue growth and an enhanced net interest margin were noted. In response to these results, DA Davidson raised its price target for Veritex to $33, maintaining a Buy rating, praising the bank’s solid core deposit franchise and stable net interest margins.
Veritex’s strategic location within the Houston and Dallas-Fort Worth metropolitan areas offers it a competitive edge, particularly in anticipation of more merger and acquisition activities in the banking sector. The bank has observed a significant increase in deposits, a reduction in non-performing assets, and projects that the net interest margin will remain stable around 3.20% into 2025.
Additionally, Veritex plans to re-enter the construction lending market, emphasizing its commitment to credit quality and operational efficiency. These insights emerged from the company’s recent earnings call, during which it also reported an increase in its Common Equity Tier 1 ratio to 10.86%, indicating a robust capital base.
InvestingPro Insights
Further insights from InvestingPro provide additional context to Piper Sandler’s favorable view on Veritex Holdings. The company currently has a market capitalization of $1.52 billion and a price-to-earnings ratio of 17.5, suggesting a valuation that remains moderate relative to its earnings. Veritex’s strong performance is highlighted by an impressive total return of 72.17% over the past year, with the stock trading close to its 52-week high, at 97.96% of that peak.
InvestingPro also notes Veritex’s high shareholder yield and strong returns in the last three months, aligning with Piper Sandler’s positive assessment. The bank’s profitability over the past year and analysts’ expectations for ongoing profitability this year affirm the positive financial trends highlighted in the article.
However, it is important to acknowledge that Veritex has shown weak gross profit margins, a factor that warrants monitoring from investors. Additionally, two analysts have recently downgraded their earnings forecasts for the upcoming periods, suggesting a note of caution despite the overall optimistic signals.
For a more thorough analysis of Veritex Holdings, InvestingPro offers further insights, presenting five additional tips that delve into the company’s financial standing and market dynamics.
This article was generated with the support of AI and reviewed by an editor. For more information, see our T&C.
Source
www.investing.com