Popular, Penske, EWBC: Top Of The Tide But Still Good Enough

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A rising tide in the stock market has taken stocks such as Popular Inc (NASDAQ:BPOP), Penske Automotive Group, Inc. (NYSE:PAG), and East West Bancorp, Inc. (NASDAQ:EWBC) to new levels but there may be more upside left in these stocks.

Popular inc

Popular surged after Q2 results

Puerto Rico based regional bank Popular Inc (NASDAQ:BPOP) surged after announcing exceptionally strong quarterly results. Despite being a regional bank, Popular Inc has a relatively large footprint which includes 192 branches in Puerto Rico and the Virgin Islands and 93 branches in New York, California, New Jersey, Florida and Illinois. In the latest quarter ended June 30, 2013, Popular Inc reported a net income of $327.5 million, compared to a profit of $65.7 million in the same period a year ago and a loss of $120.3 million for the quarter ended March 31, 2013.

In a nutshell, the growth in earnings is impressive and far above market expectations. Despite the resulting surge in prices, shares are valued at just 10.2 times of forward earnings. At the same time, current prices are at a 14 percent discount to the book value of $38.2 per share. This is important because smaller banks like this have greater proportions of their assets exposed to the commercial properties, which have seen huge value erosions. During the last quarter, Popular Inc (NASDAQ:BPOP) completed the sale of some non-performing residential mortgage loans and as a result, the company heads into the second-half of the year with nonperforming loans contributing only 3 percent of its total overall portfolio.

East West Bancorp net profit growth

East West Bancorp, Inc. (NASDAQ:EWBC) is another regional bank which announced quarterly results recently and shares have advanced 17 percent over the month. The bank said its net profit grew to $74 million in the latest quarter ended June 30, up from $70.5 million in last year’s corresponding period. Although it is not as strong as the show Popular Inc (NASDAQ:BPOP) put forth, the growth is not bad considering its exclusive focus on markets in the United States and China. In the United States, the bank is present only in California, New York, Georgia, Massachusetts, Texas and Washington.

What works in favor of East West Bancorp, Inc. (NASDAQ:EWBC) is the fact that there is a massive share repurchase program to support share prices. During the latest quarter, the company bought back shares worth $200 million but has authorized another program worth $100 million. This aggressive buyback activity and continuing improvement in financial health have led to a 33 percent growth over the last three months. A low debt capital structure, exemplified by debt equity ratio of 0.6, is another reason to look favorably to this stock.

Luxury sells always

Penske Automotive Group, Inc. (NYSE:PAG) is one of the best known names in the car retail market simply because it is one of the largest and is associated with premier names such as BMW, Porsche, Audi, and Mercedes. During the three months ended March 31, 2013, the company generated nearly 69 percent of its revenue from these premium brands. This is an important differentiator as luxury car sales have proven to enjoy a relatively higher resilience to economic downturns.

With 37 percent of its revenue generated from outside the United States, Penske Automotive Group, Inc. (NYSE:PAG) is a global player in the trade – perhaps the only one available to local investors. Auto dealership stocks are gaining in anticipation of better than expected earnings, especially after market leader AutoNation, Inc. (NYSE:AN) reported numbers which were above expectations. Penske is still to report its June quarter financials and going by the continuing traction in new vehicle sales, it wouldn’t be surprising to get another sizzling quarter here.


Overall, these stocks may be trading close to their 52 weeks high levels but still offer growth opportunities. This is especially true for smaller banks like Popular Inc (NASDAQ:BPOP) which are also helped by the recent policy action by Federal Reserve. On the other hand, Penske Automotive Group, Inc. (NYSE:PAG) continues to benefit from the fundamental strength in the markets.

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