Veritex (VBTX) earns IBD's Stock Spotlight this week due to its earnings power, recent stock gains from regional banks and the way it has climbed within the CAN SLIM system toward a buy point.
XVeritex has a Composite Rating of 91, an EPS Rating of 90, and a Relative Strength Rating of 92. Hitting all three ratings above 90 make the stock a standout. Its relative strength line, which compares a stock's performance to the S&P 500, remains strong. A move to a new high ahead of or at a stock breakout would be a bullish sign.
Veritex is part of the IBD Southwest Banking industry group, and also forms part of the S&P's Regional Banking ETF (KRE), which is up 4% this year vs. the S&P 500's loss of 5%.
Veritex To Release Earnings Tuesday
FactSet's poll of analysts sees Veritex posting earnings Tuesday of 72 cents a share for the fourth quarter. The consensus earnings estimate for 2022 is $3.10, versus $2.67 in 2021. Veritex posted Q3 earnings that were 59% higher than the previous quarter, resulting in a three-year EPS growth rate of 6%.
VBTX stock is building the right side of a cup base with a buy point of 45.46, according to MarketSmith chart analysis. The stock dropped below the 50-day moving average Thursday, following the decline in most regional and community banks and for the stock market in general.
Inflation's Impact On Regional Banks
But keep in mind that all purchases are riskier with the market in correction.
To some extent, stock price performance for regional banks depends on Treasury yields. When yields rise, it is generally seen as a positive for banks. It raises the amount that banks can charge for loans, which boosts margins.
In the fall of 2021, the Federal Reserve reversed course, calming investors by saying it recognized inflation was persisting and it may seek to raise rates in 2022.
That Fed decision coincided with the time Veritex began to climb its cup pattern.
Veritex is the holding company for Veritex Community Bank, which operates 25 branches in the Dallas Metropolitan area and in Houston. In September, it agreed to acquire North Avenue Capital, which provides loans through the USDA Business & Industry guaranteed loan program, for $62.5 million.
Follow Michael Molinski on Twitter @IMmolinski
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