Piper Sandler has adjusted its outlook on Veritex Holdings (NASDAQ: NASDAQ:VBTX), raising the price target to $30 from $27, while maintaining an Overweight rating on the stock.
The adjustment follows a day of strong performance for Veritex shares, which outpaced the index.
The firm's analyst highlighted several positive developments for the bank, including improved credit trends and a reduction in commercial real estate and risk-based capital ratio to approximately 302% from 320%.
Additionally, Veritex experienced an increase in deposits, attributed to growth in non-interest bearing deposits (NIBDs) and interest-bearing transaction accounts. In contrast, the bank saw a decrease in brokered and public funds.
A strategic move by Veritex during the quarter involved the sale of a student housing property loan. Management cited early surveillance efforts as a contributing factor to the favorable credit trends observed. Deposit growth was also bolstered by the aforementioned shifts in account types.
The recalibration of the price target to $30 reflects approximately 1.3 times the projected tangible book value per share (TBVPS) a year out. This adjustment marks a change from the previous valuation, which was based around 12 times the estimated 2025 earnings.
In other recent news, Veritex Holdings reported a robust third quarter in 2024, with operating earnings reaching $32.2 million and pretax pre-provision earnings of $44.6 million. Despite a decrease in total loans, the firm has noted growth in revenue and an improved net interest margin. DA Davidson, following these results, increased its price target for Veritex to $33, maintaining its Buy rating and highlighting the company's strong core deposit franchise and stable net interest margin.
Veritex's strategic positioning within the Houston and Dallas-Fort Worth metropolitan areas was also noted as a competitive advantage, particularly in light of expected mergers and acquisitions activity within the banking industry. The company has reported a significant increase in deposits, a decrease in non-performing assets, and an expectation for the net interest margin to remain stable at around 3.20% into 2025.
In addition to these recent developments, Veritex plans to re-enter the construction lending market, emphasizing its focus on credit quality and operational efficiency. These updates come from the firm's recent earnings call, where Veritex also reported an increase in its Common Equity Tier 1 ratio to 10.86%, reflecting a strong capital position.
InvestingPro Insights
Recent data from InvestingPro adds further context to Piper Sandler's positive outlook on Veritex Holdings (NASDAQ: VBTX). The company's market capitalization stands at $1.52 billion, with a price-to-earnings ratio of 17.5, indicating a relatively moderate valuation compared to its earnings. Veritex's strong performance is reflected in its impressive 72.17% price total return over the past year, and it's currently trading near its 52-week high at 97.96% of that peak.
InvestingPro Tips highlight Veritex's high shareholder yield and strong returns over the last three months, aligning with Piper Sandler's optimistic stance. The company's profitability over the last twelve months and analysts' predictions of continued profitability this year support the bank's improving financial health mentioned in the article.
However, it's worth noting that InvestingPro Tips also indicate that Veritex suffers from weak gross profit margins, which investors may want to monitor. Additionally, two analysts have revised their earnings downwards for the upcoming period, suggesting some caution may be warranted despite the overall positive outlook.
For readers interested in a more comprehensive analysis, InvestingPro offers 5 additional tips for Veritex Holdings, providing a deeper dive into the company's financial position and market performance.
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