When it comes to deciphering whether a stock is a buy or not, there are many factors to consider. Of course, number one should be whether the stock even aligns with your own portfolio goals. However, beyond that it can still be a sea of information to wade through.
This is likely why many Canadians go to the banking industry when starting out. Yet right now may not seem like the best time, given the banks are suffering in the current economic climate.
That being said, I’d argue it could also be a great time! These banking stocks are on sale, and one that could be a significant winner for a recovery is National Bank of Canada (TSX: NA).
Earnings
First off, let’s look at what’s been happening lately with NA stock. The bank recently put out its earnings report for the first quarter of 2024. There it saw net income rise 5% to $922 million, compared to the same time in 2023. This was driven by growth in all its business segments, but particularly with personal and commercial banking.
While it was partially offset by higher expenses and provisions for credit losses, overall, the bank actually had quite the record quarter. The stock price rose to a record high of $108 after the earnings report. It’s clear to see why, as there really was very little bad news, if any.
Revenue rose to $2.71 billion, earnings per share (EPS) to $2.59, with loan-loss provisions at $120 million. Furthermore, its future outlook remains cautious but optimistic. The bank expects unemployment to rise and delinquencies to increase. Yet NA stock is certain that its diversified business mix will protect it from these issues.
Analysts weigh in
After results came out, analysts were able to weigh in on the future outlook of the stock. And, of course, many interested in bank stocks listened in. Analysts overall were quite positive about NA stock after the earnings report, with perhaps the strongest quarter of the banks posted!
One such analyst stated that it exceeded expectations and only came in line with loan-loss provisions rather than pushing them higher as others had. Furthermore, this analyst believes that there is more room to run, with upside potential even as the stock pushed past all-time highs.
With such positive news from analysts and earnings alike, one would think everyone would be champing at the bit over this stock. But not so. This is likely because of the one caveat of an economic slowdown, and this could actually cause investors to take their returns rather than invest more.
So, is it a buy?
In this case, I certainly would wait for NA stock to come back down just a touch — especially if we’re looking at more volatility in the future. That being said, if you’re only going to be choosing from the Big Six banks, I would certainly consider NA stock on that list.
The bank held a strong first quarter, exceeding expectations. The diversified business mix should protect it from any downturns, and its loan-loss provisions are in line with what analysts expect. So, with a dividend yield at 3.93% and trading at 11.34 times earnings, the stock, at the very least, looks fairly valued for investors wanting to pick it up today.
