EQB Inc: Should You Buy the Stock?

EQB Inc (TSX:EQB) recently delivered a record-breaking quarter. Is it a good buy?

| More on:
Question marks in a pile

Image source: Getty Images

EQB (TSX:EQB) is a Canadian bank that is perhaps best known for its high-yielding Guaranteed Investment Certificates (GICs). Its GICs have been yielding 5% for many months now. This was, for a time, the highest yield available among Canadian GICs, though, lately, some larger banks have been offering high yielders as well.

In the past, I covered EQB from the perspective of a GIC investor. I own one of EQB’s GICs, and I once touted it as a solid fixed-income option. But, being a bank stock investor, a thought occurred to me: “What about EQB stock?”

Canadian bank stocks, in many cases, have yields comparable to those of high-yield GICs, plus growth potential. With a stock, you can watch a 4% yield turn into a 10% yield over time — that doesn’t really happen in the world of GICs. I still think that EQB’s GICs are a pretty good way to add some yield to your portfolio. However, EQB stock is worth exploring, too.

In this article, I will explore all the things you need to know about EQB in order to make an informed investment in its stock.

What is EQB?

EQB is a small, branchless Canadian bank. It is part of a larger trend in branchless banking that spans across the world. It offers a number of products for investors and savers, including the following:

  • GICs
  • Savings accounts
  • Mortgages
  • Lines of credit
  • And more

EQB’s business is generally less diversified than that of Canada’s Big Six banks. For example, its website does not mention a wealth management segment, nor an investment bank — both are standard for larger banks. What EQB does have is a smaller size. With a $2.23 billion market cap, EQB is a mere fraction of the size of Canada’s major financial institutions. That gives it some room to grow. It also has a somewhat cheaper valuation than the typical Canadian bank, trading at just 6.3 times earnings.

So, at a glance, EQB seems to have a lot of things going for it. The question is, how is it actually doing as a business?

How is EQB doing as a business?

In its most recent quarter, EQB delivered record results on many key metrics:

  • Adjusted earnings: $82 million, up 13%
  • Adjusted earnings per share: $2.35, up 14%
  • Return on equity (a profitability metric): 15.6%
  • Loans: up 29%

Overall, it was a solid quarter for EQB. Banks in general did well last quarter, but EQB did better than most. Its long-term growth has been pretty good, too. Over the last five years, it has grown at the following compounded annual rates:

  • Earnings: 15.4%
  • Earnings per share: 13.5%
  • Total assets: 16%

It’s been a pretty good run for EQB over the years. For now, at least, the run looks set to continue. The current year’s macro conditions — high interest rates, moderate GDP growth — favour banks, because they lead to strong lending and higher interest being collected on loans. Some people think that a recession will come later this year, but the latest reports show that jobs are still being added and spending is still on the rise. I’d say that EQB stock is a decent bet for the year ahead.

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 Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends EQB. The Motley Fool has a disclosure policy.

More on Bank Stocks

Hands shaking over a business deal
Bank Stocks

National Bank to Buy Canadian Western Bank: What Investors Need to Know

National Bank of Canada (TSX:NA) is acquiring Canadian Western Bank (TSX:CWB) in a historic deal for Canadian banks.

Read more »

Dice engraved with the words buy and sell
Bank Stocks

TD Bank Stock: Buy, Sell, or Hold at the 12-Month Low?

TD is near its 12-month low. Is more downside on the way?

Read more »

Person holds banknotes of Canadian dollars
Bank Stocks

If the Loonie Falls Against the U.S. Dollar, This Canadian Stock Could Gain

TD Bank (TSX:TD) stock finally looks like a decent investment as the loonie weakens further against the U.S. dollar.

Read more »

hot air balloon in a blue sky
Bank Stocks

Prediction: These 2 Canadian Bank Stocks Are Next in Line to Pop

Two Canadian bank stocks, one big and one small, are likely to pop following their Q2 fiscal 2024 results and…

Read more »

Double exposure of a businessman and stairs - Business Success Concept
Bank Stocks

Should You Buy TD Bank Stock for its 5.3% Dividend Yield?

Down 29% from all-time highs, TD Bank stock offers you a tasty dividend yield in 2024.

Read more »

question marks written reminders tickets
Bank Stocks

Is BMO Stock a Buy at a Pullback Around $117?

Bank of Montreal (TSX:BMO) is a blue-chip stock to own for stable returns.

Read more »

Dice engraved with the words buy and sell
Bank Stocks

TD Bank Stock: Buy, Sell, or Hold Now?

TD is out of favour with bank investors. Is this a contrarian opportunity?

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Big Bank Bargain: BMO Stock Just Dropped 8%, and That Looks Like a Deal

Bank of Montreal (TSX:BMO) stock looks way too cheap after a rough quarterly flop.

Read more »