Is EQB Stock a Buy in March 2023?

EQB Inc. (TSX:EQB) stock has taken a hit in the year-over-year period, but I’m still bullish on its future, as we look to 2024.

| More on:
edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.

Image source: Getty Images

EQB (TSX:EQB) is a Toronto-based company that provides personal and commercial banking services to retail and commercial customers across Canada. This bank is overshadowed by the Big Six Canadian bank stocks. However, it has carved out a nice slice for itself on the back of its mortgage lending business and EQ Bank. The bank is notable for offering a high-interest savings account that was much more attractive than the average offering from one of the Big Six.

Today, I want to discuss whether EQB is worth buying right now. Will the stock succumb to the market forces that have stirred volatility in recent months? Or will investors be looking at a brighter investing world in the quarters ahead? Let’s jump in.

Here’s why EQB stock has struggled over the past year…

Shares of EQB stock have dropped 17% year over year as of close on March 10. The stock has jumped 7.5% so far in 2023. EQB’s connection the Canada housing market and the looming threat of higher interest rates. Indeed, Canadian real estate has taken a major hit over the past year.

In February 2023, Toronto-area home prices were down 18% compared to February 2022. Meanwhile, the number of property sales were halved compared to the prior year. The Toronto Regional Real Estate Board (TRREB) attributed this decline to higher borrowing costs that have come about due to the aggressive interest rate-tightening policy pursued by the Bank of Canada (BoC).

That said, investors should not be in panic mode. The COVID-19 pandemic sparked a dip in interest rates that led to a massive upswing in major Canadian real estate markets. This represents a correction in that radical rise. EQB and its peers still have a nice cushion after gorging on cheap credit since the beginning of 2020.

How will Canada’s housing market look in 2024?

The BoC’s aggressive interest rate hikes have paid off to some degree, as we approach the final days of the 2022-2023 winter season. Canada’s inflation rate cooled to 5.7% in the month of February. That was a solid improvement from the 6-8% rates we have seen since March 2022. However, it is still far off from the BoC’s 2% inflation target. That means investors may have to get used to high interest rates in the near term.

Earlier this month, Royal Bank analyst Robert Hogue stated that the bottom of the Canadian housing market downturn was in sight. Hogue predicted that the recovery phase should pick up gradually by the beginning of 2024. Meanwhile, record immigration levels and low supply will maintain very strong demand in the overall market. That means early 2024 could be a great buy-in time for opportunistic investors.

EQB stock: Will it be a stronger buy in a year’s time?

This company released its fourth quarter (Q4) and full-year fiscal 2022 earnings on February 16, 2023. EQB posted adjusted diluted earnings per share (EPS) of $2.46 in Q4 2022 — up 7% from the previous year. Moreover, adjusted diluted EPS reached $9.17 for the full year, which represented 9% growth. EQ Bank achieved customer growth of 23% year over year to 308,286 and reported 14% growth in deposits to $7.9 billion.

Shares of EQB currently possess a very favourable price-to-earnings ratio of 8.1. It is trading in more attractive value territory compared to its industry peers. The stock offers a quarterly dividend of $0.35 per share. That represents a 2.2% yield.

A turbulent real estate market has failed to cast a dark shadow over EQB. On the contrary, the bank put together a strong fiscal 2022 in the face of a challenging climate. This is a stock I’m still bullish on at the time of this writing.

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 Ambrose O'Callaghan has no position in any of the stocks mentioned. The Motley Fool recommends EQB. The Motley Fool has a disclosure policy.

More on Investing

edit Woman calculating figures next to a laptop
Dividend Stocks

Get 25% Off This TSX All-Star Stock Today and Hold it for Life

If you're looking for a long-term hold, it doesn't get much better than this dividend stock, which is down 25%…

Read more »

funds, money, nest egg
Tech Stocks

TFSA Investors: 2 TSX Stocks for a Legit Shot at $1 Million in 20 Years

Undervalued TSX tech stocks such as Neighbourly Pharmacy can help investors to turn a $100,000 investment into $1 million in…

Read more »

analyze data

Revealed: The Canadian Stock I’ll Probably Be Buying Hand Over Fist in April

CN Rail (TSX:CNR) is a dividend-growth king that's fresh off a correction, making it my top pick for April 2023.

Read more »

analyze data
Dividend Stocks

Better RRSP Buy: BCE Stock or Enbridge Stock?

BCE and Enbridge look like cheap stocks today for RRSP investors.

Read more »

tsx today
Metals and Mining Stocks

TSX Today: Stocks on Track to End Q1 2023 in Green

The main TSX index remains on track to end the first quarter of 2023 in positive territory.

Read more »

Dollar symbol and Canadian flag on keyboard
Dividend Stocks

TFSA: 3 of the Best Canadian Dividend Stocks to Buy This Year

These three Canadian dividend stocks are some of the best to buy for the long haul and have tremendous potential…

Read more »

Young woman sat at laptop by a window
Dividend Stocks

Why I’ll Continue Drip-Feeding This Superb Dividend Stock, Recession or Not

There is a long history of this dividend stock bouncing back post recession, which is why I'll continue to drip-feed…

Read more »

Various Canadian dollars in gray pants pocket
Dividend Stocks

TFSA Investors: Earn $60/Month With These 2 Top Dividend Stocks

BCE stock is one of two top dividend stocks that can help you achieve your tax-free income goals in your…

Read more »