NVIDIA (NASDAQ: NVDA) has been rallying hard over the last 12 months. It started 2023 at $240 and rallied to $531 over the course of a year. If you’d invested $10,000 in the stock at the beginning of last year and held to today, you’d have $21,500 by now. If the stock keeps up its momentum in the coming months, it could overtake Amazon’s market capitalization. If that were to occur, investors would experience very good returns.
The problem is, there’s a lot of uncertainty as to whether it can happen. NVIDIA’s stock already trades at nosebleed multiples; for example, 29 times sales and 39 times book value. These multiples make NVIDIA one of the most expensive U.S. tech stocks — and that group of stocks isn’t known for cheapness, to put it mildly. You can find stocks with growth rates similar to NVIDIA’s without the outrageous price tag. In this article, I will explore one such stock that just so happens to be listed on Canada’s own TSX Composite Index.
EQB
EQB (TSX: EQB) is a Canadian bank that operates primarily online. It is known for its high-yielding Guaranteed Investment Certificates (GICs), which pay as much as 5.5%. It is also known for having much faster growth than the average Canadian bank, which is a big part of why its stock has risen over the last 12 months when most Canadian bank stocks declined in price in the same period.
High growth
Apart from its high-yielding GICs, another thing EQB is known for its rapid growth. In its most recent quarter, it delivered the following metrics:
- $395.3 million in revenue, up 68% year over year (y/y) and 39% quarter over quarter (q/q).
- $141 million in net income, up 208% y/y.
- $345 million in net interest income, up 58% y/y.
- $50 million in non-interest income, up 202%.
- $70 in book value per share, up 12%.
- A 16% return on equity.
These are all excellent growth metrics. EQB’s sales and earnings are not growing quite as fast as NVIDIA’s, but they are growing more than the average bank’s sales and earnings are. And, of course, EQB is much cheaper than NVIDIA, as I’ll show in the next section.
A relatively modest valuation
One advantage that EQB has over NVIDIA stock is its valuation. Whereas NVDA trades at 29 times sales and 61 times earnings, EQB trades at the following:
- 7.5 times sales.
- 2.99 times sales.
- 1.3 times book value.
That’s a pretty cheap valuation. In fact, it’s so cheap that you might think there must be something wrong with EQB as a company for it to get so cheap. However, after looking into the matter, I concluded that EQB is a quality bank that practices sound risk management. It has a very high liquidity coverage ratio (339%), a full 239% higher than what regulators require. It also has a deposit base that’s mostly made up of GICs, which are “locked up” for a period of time, limiting the possibility of a bank run at EQB. These factors, along with the raw growth and valuation numbers, lead me to think that EQB is a growth stock worth looking at.
