Shares of New York Community Bancorp (NYCB) slipped -3.3 % during today's afternoon session, bringing their 52 week performance to -8.9%. The stock seems to be fairly valued in terms of traditional metrics, but in this day in age, we believe that a complete stock analysis should also take into account the company's strong growth indicators and mixed market sentiment.
New York Community Bancorp, Inc. operates as the bank holding company for New York Community Bank that provides banking products and services in Metro New York, New Jersey, Ohio, Florida, and Arizona. The mid-cap Financial Services company is based in Hicksville, United States.
NYCB's P/E Ratio Is Better Than the Sector Average
Compared to the Financial Services sector's average of 13.34, New York Community Bancorp has a trailing twelve month price to earnings (P/E) ratio of 8.0 and an expected P/E ratio of 8.3. P/E ratios are calculated by dividing the company's share price by its trailing 12 month or forward earnings per share, which stand at $1.26 and $1.22 respectively.
Earnings represent the net profits left over after subtracting costs of goods sold, taxes, and operating costs from the company's recorded sales revenue. One way of looking at the P/E ratio is that it represents how much investors are willing to pay for every dollar's worth of the company's earnings. Since New York Community Bancorp's P/E ratio is lower than its sector average, we can deduce that the market is undervaluing the company's earnings.
New York Community Bancorp Has a Negative Rate of Expected Growth
P/E ratios are falling out of favor as a means of valuing stocks for a number of reasons. Earnings are subject to manipulation, and the P/E ratio is static in time, in the sense that it doesn't take into account expected long term growth of the company. Although estimated long terms growth rates are just as easily manipulable as earnings, dividing New York Community Bancorp's P/E ratio by its expected growth rate can tell us the relative market valuation of the company in relation to expected earnings growth.
The resulting metric, called price to earnings growth (PEG) is -30.7 for New York Community Bancorp. Since the PEG ratio is negative and the company's reported earnings per share are positive, we can deduce that the company's expected growth rate is negative. Needless to say, this is a red flag for investors with a long term horizon.
NYCB Has an Attractive P/B Ratio
During the mid-twentieth century, value investors such as Ben Graham focused primarily on finding companies that were trading below the book value of its equity. This means companies whose market value is lower than the book value, or the sum of all of its tangible assets minus liabilities. Undervalued companies generally have a price to book (P/B) ratio below 1, and New York Community Bancorp is no exception since its P/B ratio is 0.8.
In modern times, it is increasingly rare to find companies with low P/B ratios that the equity market is avoiding without reason. Ironically, such a low P/B ratio should alert prospective investors to the existence of qualitative factors that could be contributing to its low valuation. Should no such factors exist, or if the investor is of the pure-value profile, then of course such a low P/B ratio should be added to the positive side of the stock's ledger.
NYCB Is Generating Cash
New York Community Bancorp has decent free cash flows. This represents the actual cash that the company is generating from its sales revenues, minus its re-investments in the business (capital expenditures). The company's operating cash flows have an average growth rate of -23.8%, compared to inf% for capital expenditures. From the table below we can also see that the free cash flows has an average growth rate of -24.4% and a coefficient of variability of 31.3%:
|Date Reported||Cash Flow from Operations ($ MM)||Capital expenditures ($ MM)||Free Cash Flow ($ MM)||YoY Growth (%)|
We See Mixed Market Signals Regarding NYCB
New York Community Bancorp has an average rating of buy and target prices ranging from $12 to $8.5. At its current price of $10.07, the company is trading -6.15% away from its target price of $10.73. 2.1% of the company's shares are linked to short positions, and 44.7% of the shares are owned by institutional investors.
|Vanguard Group, Inc. (The)||44,302,719||2022-09-29||10%||$446,128,366|
|Dimensional Fund Advisors LP||22,068,653||2022-09-29||5%||$222,231,328|
|State Street Corporation||15,944,115||2022-09-29||3%||$160,557,233|
|Goldman Sachs Group Inc||7,450,961||2022-09-29||2%||$75,031,174|
|Cannell (Peter B.) & Company Inc||6,514,139||2022-09-29||1%||$65,597,377|
|Bank Of New York Mellon Corporation||6,399,062||2022-09-29||1%||$64,438,552|
|Geode Capital Management, LLC||6,252,951||2022-09-29||1%||$62,967,214|
|Balyasny Asset Management LLC||6,157,478||2022-09-29||1%||$62,005,801|
|Kahn Brothers Group Inc.||5,937,115||2022-09-29||1%||$59,786,746|