Why Canadian Imperial Bank of Commerce Is up Over 2%

Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM) is up over 2% following its Q4 earnings release. Should you buy now? Let’s find out.

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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.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

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

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