Actions of Axos Financial (NYSE: AX) rose 16.9% in October, according to data from S&P Global Market Intelligence.
The small-cap bank posted formidable results at the end of October, which far exceeded expectations, sending shares of this dilapidated banking action back to pre-pandemic levels.
Axos was born into the digital age in 2000; in fact, it used to be called “Internet Bank”, touting its branchless model well ahead of its time. These digital prowess may have helped the company in today’s environment.
In the third quarter, revenue jumped 30.7% to $ 163.2 million, $ 20.5 million ahead of analyst expectations, and earnings per share of $ 0.88 exceeded expectations of $ 0.20. Axos has in fact been able to grow its loan portfolio, with extensive refinancing and home buying activities as competitors have pulled out.
On the liability side, the company also reduced interest charges on deposits, due to both lower rates overall and some acquisitions of lower rate deposits last year. Interestingly, the company borrowed 4.75% subordinated debt in order to repurchase its shares during the quarter, as Axos is small enough not to be subject to the repurchase restrictions imposed by the Federal Reserve earlier this year.
CEO Greg Garrabrants said during the earnings call: “Our cautious underwriting emphasizing retained asset values with a low loan to values on our balance sheet continues to serve us well as real estate values hold on to the bottom line. most markets. “
Axos started out as a giant high net worth mortgage lender, but has since diversified its loan offerings to commercial and industrial loans, and consumer loans such as unsecured auto and personal loans; he even bought a broker last year.
These new companies appear to be doing well, complementing a currently strong core mortgage business as strong housing and refinancing markets are doing very well relative to the rest of the economy. Although the stock has practically doubled from its March lows, Axos is still trading at around 8.9x earnings, making it a stock of value to look in the small cap area.
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