Triumph Bancorp Inc (NASDAQ:TBK), a US$1.0b small-cap, is a bank operating in an industry, which now face the choice of either being disintermediated or proactively disrupting their own business models to thrive in the future. Financial services analysts are forecasting for the entire industry, a highly optimistic growth of 40% in the upcoming year , and a massive growth of 56% over the next couple of years. However this rate still came in below the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, as well as evaluate whether Triumph Bancorp is lagging or leading in the industry.
See our latest analysis for Triumph Bancorp
What’s the catalyst for Triumph Bancorp’s sector growth?
The threat of disintermediation in the payments industry is both real and imminent, taking profits away from traditional incumbent financial institutions. Over the past year, the industry saw growth in the teens, though still underperforming the wider US stock market. Triumph Bancorp leads the pack with its impressive earnings growth of 31% over the past year. Furthermore, analysts are expecting this trend of above-industry growth to continue, with Triumph Bancorp poised to deliver a 81% growth over the next couple of years compared to the industry’s 40%. This growth may make Triumph Bancorp a more expensive stock relative to its peers.
Is Triumph Bancorp and the sector relatively cheap?
Banking companies are typically trading at a PE of 17.69x, in-line with the US stock market PE of 20.06x. This means the industry, on average, is fairly valued compared to the wider market – minimal expected gains and losses from mispricing here. However, the industry returned a lower 8.1% compared to the market’s 10%, potentially indicative of past headwinds. On the stock-level, Triumph Bancorp is trading at a PE ratio of 20.87x, which is relatively in-line with the average banking stock. In terms of returns, Triumph Bancorp generated 6.7% in the past year, which is 1.5% below the banking sector.
Next Steps:
Triumph Bancorp’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If Triumph Bancorp has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at Triumph Bancorp’s fundamentals in order to build a holistic investment thesis.