This Under-the-Radar Canadian Stock Rose 244% in 4 Years

There are few financial stocks doing better than EQB Inc (TSX:EQB).

| More on:
Target. Stand out from the crowd

Image source: Getty Images

It’s not very often that you see a stock rise 244% in just a few short years. When you do see such a gain, it’s usually a short-lived one observed in a bubble that quickly reverses. For the most part, it isn’t worth paying attention to the fact that a stock rose a lot in the past: it’s the amount of earnings per dollar you invest that counts. However, there is one Canadian financial stock that rose 244% in four short years which is actually still rather cheap after the rally. In this article, I will explore this remarkable multi-bagger that still trades at just seven times earnings.

EQB Inc.

EQB Inc (TSX:EQB) is a Canadian alternative lender and online bank that operates on a branchless model. By not having branches, it saves money. It also doesn’t suffer from all that big a disadvantage in retaining customers because of this, as 93% of Canadians these days are comfortable with online banking.

High growth

One factor that EQB has in its favour right now is high growth. In its most recent quarter, it delivered:

  • $771 million in interest income, up 34% year over year.
  • $256 million in net interest income, up 17.4%.
  • $104 million in net income, up 131%.
  • $2.68 in diluted earnings per share (EPS), up 120%.

On the whole, it was a pretty good showing. One factor that affected the earnings was EQB’s choice to change its fiscal year. The “year over year” changes above are from the December 2022 quarter to the January 2023 quarter. According to the earnings press release, growth would have only been 12% using the exact same measurement periods in each year. Nevertheless, the numbers show that EQB has grown a lot since late 2022, a period of time in which not even 1.5 years has elapsed.

Sticky deposits

Another factor that EQB has going for it is “sticky” deposits; that is, deposits that can’t just be withdrawn overnight. Unlike most banks, which offer mostly checking accounts, most of EQB’s deposits are guaranteed investment certificates (GICs). These can’t be withdrawn until they mature. As a result, EQB has a sky-high liquidity coverage ratio of 339%, even though its ratio of cash and securities to deposits is only 10%.


As we’ve seen, EQB is growing quickly and has a very good liquidity coverage ratio. These are features that normally cause bank stocks to trade at high multiples. Fortunately, in EQB’s case, the expensive valuation is not present, as the bank trades at:

  • 7 times earnings.
  • 2.8 times sales.
  • 1.2 times book value.

By the standards of growth stocks (which EQB certainly is), this is cheap as dirt. So, EQB stock appears to offer a lot of value per dollar invested.

Foolish takeaway

Compared to other TSX banks, EQB has grown like wildfire over the years. Although things are starting to slow down a bit, the bank is still performing well while being cheap. On the whole, it’s a very attractive value proposition.

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

Financial technology concept.
Bank Stocks

How Much Will Royal Bank of Canada Pay in Dividends This Year?

Royal Bank offers safe dividends. However, it would be safer for investors to buy on a pullback.

Read more »

Glass piggy bank
Bank Stocks

2 No-Brainer Financial Stocks to Buy With $1,000 Right Now

These no-brainer financials stocks are top options for long-term investors seeking to gain exposure to Canada's robust banking system.

Read more »

question marks written reminders tickets
Bank Stocks

Is BMO Stock a Buy at a Pullback Around $125?

Bank of Montreal stock trades 18% below all-time highs, increasing its forward yield to almost 5% in May 2024.

Read more »

Bank Stocks

TD Bank Stock Falls 6% on Money-Laundering Investigation: Deal or Danger?

TD Bank (TSX:TD) stock looks like a great bargain after its latest plunge over the ongoing U.S. probe.

Read more »

Bank sign on traditional europe building facade
Bank Stocks

Forget AI: 3 Bank Stocks to Buy Instead

Bank stocks like EQB Inc (TSX:EQB) are much cheaper than AI stocks, despite in many cases having comparable growth.

Read more »

A bull outlined against a field
Bank Stocks

Big Bank Bull Run? 2 Canadian Bank Stocks Overdue for a Rally

Buy TD Bank (TSX:TD) stock and another bank as they crash further into the abyss.

Read more »

money cash dividends
Stocks for Beginners

TD Stock’s Dividend Yield Hits Over 5%: Is it Finally Time to Buy?

TD stock (TSX:TD) saw shares fall further after announcing a probe was underway in the US to identify money laundering…

Read more »

edit Business accounting concept, Business man using calculator with computer laptop, budget and loan paper in office.
Bank Stocks

Better Buy: Royal Bank Stock or National Bank of Canada?

Banks are among Canada's most coveted blue-chip stocks, and there is a good reason for this. Not only are all…

Read more »