Why National Bank of Canada (TSX:NA) Plunged After Hitting Record Highs

The shares of National Bank of Canada (TSX: NA) recently posted a fresh record high near $106.10 per share in the third week of November. However, its stock price has consistently been falling for the last several days. As of November 2, National Bank stock was trading at $95.50 per share — down nearly 10% from its all-time high. Let’s take a closer look at its recent financial trends and find out what could be driving its stock downward lately.

National Bank of Canada stock

In the last week, the broader market has seen a sharp correction with a sudden rise in volatility due to investors’ rising concerns about the newly identified coronavirus variant Omicron. That’s one of the reasons why the TSX Composite Index has dived by about 5.5% in the last 10 days.

Most investors are worried that the new variant could hurt the pace of the ongoing economic recovery, which could badly affect businesses across sectors, including banking. These concerns could be the first main reason why National Bank of Canada stock has sharply retraced from its record highs.

The growth trend in its financials

To find out more reasons for the recent drop in National Bank stock, let’s take a closer look at the ongoing growth trend in its financials.

The bank reported its latest quarterly results on December 1. In the fourth quarter of its fiscal year 2021 (ended in October 2021), National Bank reported a nearly 31% year-over-year increase in its adjusted earnings to $2.21 per share. Its total revenue rose by about 10% from a year ago to $2.25 billion during the quarter.

While the overall growth trend in National Bank’s financials looks impressive, it missed Street analysts’ earnings and revenue estimates in the latest quarter by a narrow margin. Its latest quarterly earnings miss could be the reason why its stock tanked by nearly 3.5% Wednesday.

Is NA stock worth buying on the dip?

Notably, Q4 was the first quarter when the National Bank of Canada missed analysts’ revenue estimates after beating expectations in the previous four quarters. Similarly, its earnings have been higher than Street’s expectations for nine quarters in a row prior to Q4. More importantly, the bank is continuing to post strong double-digit year-over-year earnings and revenue growth.

In its latest quarterly earnings report, National Bank mentioned improving macroeconomic outlook and credit conditions, along with a reduction in credit losses as some of the key reasons for its strong revenue growth across segments. I expect the bank’s organic growth trend to improve further in the fiscal year 2022, as the long-term economic growth outlook remains strong, despite the short-term worries about the Omicron variant.

After posting largely strong Q4 results, National Bank’s management announced a solid 23% sequential increase in its quarterly dividends to about $0.87 per share. Apart from all the positive fundamental factors that I’ve mentioned above, this impressive rise in dividends gives long-term investors another reason to buy NA stock now — especially when it’s falling.