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Why Canadian Imperial Bank of Commerce Is up Over 2%

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), Canada’s fifth-largest bank, released its fourth-quarter earnings results this morning, and its stock has responded by rising over 2% in early trading. Let’s break down the results and the fundamentals of its stock to determine if we should be long-term buyers today.

Breaking down the quarterly results

Here’s a quick breakdown of 10 of the most notable financial statistics from CIBC’s three-month period ended October 31, 2017, compared with the same period in 2016:

Metric Q4 2017 Q4 2016 Change
Net interest income $2,464 million $2,110 million 16.8%
Non-interest income $1,805 million $1,571 million 14.9%
Total revenue $4,269 million $3,681 million 16.0%
Adjusted net income $1,164 million $931 million 25.0%
Adjusted diluted earnings per share (EPS) $2.81 $2.60 8.1%
Total assets $565,264 million $501,357 million 12.7%
Deposits $439,706 million $395,647 million 11.1%
Loans and acceptances, net of allowance $365,558 million $319,781 million 14.3%
Common shareholders’ equity $29,238 million $22,472 million 30.1%
Book value per share $66.55 $56.59 17.6%

What should you do now?

It was a fantastic quarter overall for CIBC, and it posted phenomenal results for the full year of fiscal 2017, with its revenue up 8.3% to $16.28 billion and its adjusted diluted EPS up 8.7% to $11.11 compared with fiscal 2016. With these strong results in mind, I think the market has responded correctly by sending its stock higher, and I think it still represents a great long-term investment opportunity for two fundamental reasons.

First, it’s still undervalued. CIBC’s stock still trades at just 10.5 times fiscal 2017’s adjusted EPS of $11.11, which is inexpensive compared with its five-year average multiple of 10.8; this multiple is also very inexpensive given its current earnings-growth rate, its estimated 4.1% long-term earnings-growth rate, and the strength and stability of its business model.

Second, it’s a dividend-growth superstar. CIBC pays a quarterly dividend of $1.30 per share, representing $5.20 per share annually, giving it a beautiful 4.4% yield. The company has also raised its annual dividend payment for seven consecutive years, and its 2.4% hike in August has it on track for fiscal 2018 to mark the eighth consecutive year with an increase.

CIBC’s stock is up over 9% since I recommended it following its third-quarter earnings release on August 24, and I think it is still a strong buy today, so take a closer look and strongly consider making it a long-term core holding.

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Fool contributor Joseph Solitro has no position in any stocks mentioned.

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