Can FISI, BKYF Sustain Recent Earnings Spurt?

Jan. 26, 2014 5:19 PM ETFISI, BKYF

154 Followers

Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

http://www.StockPromoters.com

Long/Short Equity, Portfolio Strategy

Seeking Alpha Analyst Since 2012

Founded in 2003, StockPromoters.com has tracked hundreds of thousands of promotions by thousands of promoters and counting. Stock Promotion can be an effective and necessary tool if done correctly and responsibly, and it can be crippling to both the public company and the promoter if done recklessly. StockPromoters.com Tracks thousands of promoters. We display their compensation and we know if they are actually the ones behind that public company despite what they may or may not disclose to the public. We cut through the tape and get right to the heart of the matter. Q. What is the purpose of the promotion? Is it being done to increase shareholder and corporate value in order to better serve the public company? Or is it to create liquidity so insiders and “friendly” shareholders can unload their position? Q. Does the promoter have any "skin in the game”? Are they paid in Cash? Free Trading Stock? Restricted Stock? Will he be selling his stock, or holding it for the long term? Do they believe in the company they're promoting? Q. What can you expect form this promoter? Is this a "Pump and Dump”, or is this a gradual marketing campaign to attract new shareholders? Do you want to know who the best promoters are and who you should be following? Do you want to know who the worst is and who you should avoid like the plague? All of this and more is answered by utilizing our proprietary stock promotion tracking system which is behind the StockPromoters.com website.

Financial stocks, especially regional and small banks, are in limelight with a string of vastly improved results by a number of companies. Financial Institutions Inc. (NASDAQ: FISI) and The Bank of Kentucky Financial Corp (NASDAQ: BKYF) were among the stocks that benefitted from this trend following fantastic quarterly earnings. The big question is if these stocks can continue to outperform wider markets and going by the Federal Reserve's decision to taper its asset buying program, the ground looks ready for a rally in 2014. Here is a closer look.

New York based Financial Institutions Inc. is the holding company for Five Star Bank, which offers an array of banking services to retail, commercial, and municipal customers in Western and Central New York. In the most recent quarter ended September 30, 2013, the company's net income jumped 48.8 percent to $5.8 million although its interest income dropped slightly during the period. With retail interest rates set to go up, the company is likely to see more of this phenomenon. The company is valued 12.5 times its forward earnings and offers a dividend yield of 3.1 percent. This is despite advancing more than 20 percent in the last quarter on the bourses. A price by book value ratio of 1.47 also indicates it remains undervalued. Among other positives, the company is a debt free entity which allows it to rake in net margin of 24 percent; slightly more than the segment average. As such, it is one of the attractive options if the industry goes into consolidation phase.

Similarly, The Bank of Kentucky Financial Corp has seen a steady upward trend with quarterly gains in excess of 30 percent. The stock has created new 52-week high and currently trades very close to this level. In the third quarter, the company's net earnings moved up 29 percent to $5.4 million on the back of policy tailwinds. These tailwinds are expected to keep pushing earnings as banks' interest costs remain same, but retail interest rates go up. With regards to valuations, the stock is reasonably priced at a price earnings ratio of 14.7, while dividend yield of 1.8 percent is not too bad although this should not be the primary reason to buy this stock. The Bank of Kentucky has a solid 31.4 percent net margin and despite a market cap of $277 million, has low institutional ownership. This indicates there is room to grow.

Being regional banks, there are limits to growth these companies can manage; however, these should be bought for the quality of earnings and their solid balance sheets.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You