Should We Be Bullish on NorthEast Community Bancorp?

By Emilio Sanchez • Wednesday, June 21 10:11 • Permanent Link

The best investors are not afraid to go against the grain. And an investment in NorthEast Community Bancorp, which has an average analyst rating of only hold, would certainly fit the bill. Might patient investors be able to find value in this stock? Let's dive into numbers and see for ourselves.

Over the last year, NorthEast Community Bancorp shares have moved 19.8% while trading between the prices of $11.55 and $15.99. This represents a 3.0% difference compared to the S&P 500, which moved 16.7% over the last 52 weeks.

At its current price of $14.35 per share, NECB has a trailing price to earnings (P/E) ratio of 6.8 based on its 12 month trailing earnings per share of $2.12. Considering its future earnings estimates of $1.57 per share, the stock's forward P/E ratio is 9.1. In comparison, the average P/E ratio of the Finance sector is 14.34 and the average P/E ratio of the S&P 500 is 15.97.

We can also compare the ratio of NorthEast Community Bancorp's price to its book value. A company's book value refers to its present equity value: what is left when we subtract its liabilities from its assets. NECB has a book value of 0.76, with anything close or below one indicating a potentially undervalued company.

The final element of our analysis will touch on NorthEast Community Bancorp's capacity to generate cash for the benefit of its shareholders or for reinvesting in the business. For this, we look at the company's levered free cash flow, which is the sum of all incoming and outgoing cash flows, including the servicing of current debt and liabilities. NorthEast Community Bancorp has a free cash flow of $24.24 Million, which it uses to pay its shareholders a 1.7% dividend.

At Market Inference, we will keep monitoring NorthEast Community Bancorp to see if the contrarian thesis in this stock will be vindicated. Going against the grain can be an excellent way for investors to extract value from the stock market, but it's never a good idea to apply a strategy for its own sake. Do your own research and make sure that the facts support your decision.

The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.