Why Royal Bank of Canada Rose 1% on Wednesday

Royal Bank of Canada (TSX:RY)(NYSE:RY), Canada’s largest bank, announced its fourth-quarter earnings results Wednesday morning, and its stock responded by rising about 1% as of 2:00 P.M. EST. Let’s break down the earnings results and the fundamentals of its stock to determine if it could continue higher from here, and if we should be long-term buyers today.

The results that sent the stock higher

Here’s a quick breakdown of 12 of the most notable financial statistics from RBC’s three-month period ended October 31, 2017, compared with the same period in 2016:

Metric Q4 2017 Q4 2016 Change
Non-interest income $6,162 million $5,177 million 19.0%
Net interest income $4,361 million $4,187 million 4.2%
Total revenue $10,523 million $9,364 million 12.4%
Net income $2,837 million $2,543 million 11.6%
Diluted earnings per share (EPS) $1.88 $1.65 13.9%
Total assets $1,212,853 million $1,180,258 million 2.8%
Total deposits $789,635 million $757,589 million 4.2%
Total loans, net of allowance for loan losses $542,617 million $521,604 million 4.0%
Common equity $67,416 million $64,304 million 4.8%
Total assets under management $639,900 million $586,300 million 9.1%
Total assets under administration $5,473,300 million $5,058,900 million 8.2%
Book value per share $46.41 $43.32 7.1%

What should you do now?

It was a great quarter overall for RBC, and it capped off a very strong year for the company, in which its total revenue increased 4.8% to $40.67 billion, and its EPS increased 11.5% to $7.56 compared with fiscal 2016. That being said, I think the pop in its stock is warranted, and I think it still represents a very attractive long-term investment opportunity for two fundamental reasons.

First, it’s attractively valued. RBC’s stock still trades at just 13.4 times fiscal 2017’s EPS of $7.56 and only 12.7 times fiscal 2018’s estimated EPS of $7.96, both of which are inexpensive given its current earnings-growth rate and its estimated 7.5% long-term earnings-growth rate; these multiples are also inexpensive given the low-risk nature of its business model.

Second, it’s a dividend aristocrat. RBC pays a quarterly dividend of $0.91 per share, representing $3.64 per share annually, which gives it a lavish 3.6% yield. Foolish investors must also note that 2017 marks the seventh consecutive year in which it has raised its annual dividend payment, and its 4.6% hike in August has it on track for fiscal 2018 to mark the eighth consecutive year with an increase.

RBC’s stock is up over 10% since it reported its third-quarter earnings results on August 23, and I think it is still a strong buy today, so take a closer look and 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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