On Thursday, Piper Sandler, a financial services firm, increased its price target on shares of Veritex Holdings (NASDAQ:VBTX) to $27.00, up from the previous target of $26.00. The firm has maintained an Overweight rating on the stock. The adjustment follows Veritex Holdings' performance, which saw the stock outperforming for most of the day but experiencing a lag towards the market's close.
The firm's analysis pointed out the quarter-over-quarter improvement in deposit and credit trends at Veritex Holdings as a positive sign. Despite this progress, the valuation of the company has been subdued over the last two years due to concerns about credit costs and a funding base that is perceived to be highly leveraged.
The new price target of $27 is based on approximately 12 times the estimated earnings for 2025, an increase from the previous 11.5 times, as industry multiples have expanded. This valuation also reflects roughly 1.2 times the year-out tangible book value per share (TBVPS). According to Piper Sandler, this presents an attractive multiple for a company with potential optionality.
The firm's commentary suggests that there is more room for the margin between the company's current valuation and its potential to close. This outlook is based on the recent improvements and the belief that the concerns which have previously dampened the stock's value may be mitigated.
In summary, Piper Sandler's revised price target for Veritex Holdings reflects a positive outlook on the company's financial trends and potential for valuation improvement, despite the stock's underperformance at the end of the trading day. The Overweight rating indicates the firm's confidence in the stock's future performance relative to the market.
In other recent news, Veritex Holdings has been the subject of several notable developments. The company released its second-quarter financial results for 2024, with strong net interest income and effective cost management.
Still, pre-provision net revenue and earnings per share did not meet expectations due to lower fees. Analysts from Stephens and Piper Sandler have shown confidence in the company, raising their price targets to $27 and $26 respectively, while maintaining neutral ratings.
Veritex Holdings has also declared a quarterly cash dividend of $0.20 per share, continuing its pattern of returning value to shareholders. The company reported Q1 2024 earnings of $29.1 million, or $0.53 per share, and initiated a $50 million stock repurchase program. Moreover, Veritex is taking measures to increase loan loss reserves and reduce concentrations, indicating a proactive approach to strengthening its balance sheet.
Looking ahead, analysts anticipate stable credit metrics for the next quarter and expect the bank's strategy to enhance its balance sheet to be fully implemented by the end of 2024.
Earnings estimates for 2025 have been revised upwards by 7% due to the removal of several anticipated rate cuts and heightened expectations for loan growth. These are among the recent developments in Veritex Holdings' financial performance and strategic initiatives.
InvestingPro Insights
Veritex Holdings (NASDAQ:VBTX) has demonstrated notable resilience in recent times. According to the latest data, the company boasts a solid market capitalization of $1.3 billion and has achieved a strong return over the last month, with a 19.55% increase, and an impressive 18.65% over the last three months. This aligns with Piper Sandler's positive outlook on the stock, reinforcing the potential for continued growth.
Despite concerns over weak gross profit margins, analysts remain optimistic about Veritex Holdings' profitability, forecasting the company to be profitable this year. In fact, the company has been profitable over the last twelve months, with an operating income margin of 35.24%. Moreover, the company's P/E ratio stands at a reasonable 15.23, suggesting that the stock could be attractively priced relative to its earnings.
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