Laurentian Bank of Canada (TSX:LB) and Canadian Western Bank (TSX:CWB) are two of the largest financial institutions in Canada, and both of their stocks represent attractive long-term investment opportunities today.
However, the laws of diversification clearly state that we cannot own both, so let’s take a closer look at each company’s earnings results in the first nine months of fiscal 2015, their stocks’ valuations, and their dividends to determine which represents the better buy today.
Laurentian Bank of Canada
Laurentian Bank’s stock has fallen less than 1% year-to-date, including an increase of over 4% since it released its earnings results on the morning of September 3 for its three and nine-month periods ending on July 31, 2015. Here’s a summary of eight of the most notable statistics from the first nine months of fiscal 2015 compared with the same period in fiscal 2014:
- Adjusted net income increased 5.9% to $128.07 million
- Adjusted earnings per share increased 6.4% to $4.17
- Revenue increased 2% to $665.48 million
- Total assets increased 9% to $39.56 billion
- Total loans and acceptances increased 5.1% to $28.66 billion
- Total deposits increased 6.6% to $25.8 billion
- Total assets under management and administration increased 3.5% to $43.28 billion
- Book value per share increased 5.2% to $47.45
At current levels, Laurentian Bank’s stock trades at 8.9 times fiscal 2015’s estimated earnings per share of $5.61 and 8.5 times fiscal 2016’s estimated earnings per share of $5.87, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 10.2 and the industry average multiple of 12.1.
It also trades at a mere 1.05 times its book value per share of $47.45, which is inexpensive compared with its market-to-book value of 1.14 at the end of the third quarter of fiscal 2014.
In addition, Laurentian Bank pays a quarterly dividend of $0.56 per share, or $2.24 per share annually, giving its stock a 4.5% yield at today’s levels. Investors should also note that the company has increased its dividend for eight consecutive years.
Canadian Western Bank
CWB’s stock has fallen over 27% year-to-date, including a relatively flat performance since it released its earnings results on the morning of September 3 for its three and nine-month periods ending on July 31, 2015. Here’s a summary of eight of the most notable statistics from the first nine months of fiscal 2015 compared with the same period in fiscal 2014:
- Adjusted common shareholders’ net income increased 4.5% to $155.1 million
- Adjusted cash earnings per share increased 4.3% to $1.96
- Revenue increased 4.8% to $457.32 million
- Total assets increased 8.4% to $22.25 billion
- Total loans increased 11.1% to $19.04 billion
- Total deposits increased 8% to $18.85 billion
- Total assets under management increased 6.9% to $1.91 billion
- Book value per share increased 15.7% to $22.01
At today’s levels, CWB’s stock trades at 9.1 times fiscal 2015’s estimated earnings per share of $2.61 and 8.8 times fiscal 2016’s estimated earnings per share of $2.72, both of which are inexpensive compared with its five-year average price-to-earnings multiple of 13.7 and the industry average multiple of 12.1.
It also trades at a mere 1.08 times its book value per share of $22.01, which is inexpensive compared with its market-to-book value of 2.19 at the end of the third quarter of fiscal 2014.
Additionally, CWB pays a quarterly dividend of $0.22 per share, or $0.88 per share annually, which gives its stock a 3.7% yield at current levels. It is also very important to note that the company has increased its dividend for 23 consecutive years.
Which bank is the better buy today?
After directly comparing Laurentian Bank of Canada and Canadian Western Bank, I think Laurentian Bank represents the better long-term investment opportunity today. Both companies reported strong earnings results in the first nine months of fiscal 2015, but Laurentian’s stock trades at more attractive forward valuations and it has a higher dividend yield, giving it the easy win in this match-up. Foolish investors should consider establishing positions today.
