Increasing Returns with Great Southern Bancorp (NASDAQ: GSBC)
Increasing Returns with Great Southern Bancorp (NASDAQ: GSBC)
By: Matt Rego
Stocks continue their amazing run despite critics and pundits’ call for a deep sell off. The market’s resilience may be enough to get some retail investors back in the game that have been missing out on the greatest bull market in years. The problem with entering into a bull market is that there are usually no bargains left and you must work harder to find stocks that still are well valued and have some upside potential. Great Southern Bancorp, Inc. (NASDAQ: GSBC) is one of those stocks.
Great Southern is a regional bank that operates primarily in the Southwest region. However, the bank does have branches in Missouri, Iowa, Kansas, Nebraska, Arkansas and Minnesota. Great Southern is a more conservative bank stock because it relies on traditional banking methods for its income such as savings, checking, CDs, retirement accounts, loans, etc. Unlike the larger cap banks, Great Southern does not deal with investment banking, which has resulted in lawsuits by the Federal government on some of the bigger banks due to their role in the financial crisis.
Fundamentally, Great Southern has a price to earnings of 8 and a forward price to earnings of 13.42. Moving to the PEG, we see the stock is undervalued due to a PEG of 0.89. Debt to equity comes in a bit high at 0.71 but most of that debt is short term and will be paid off within a year. Additionally, we can see that Great Southern does have a nice cash reserve of almost $8 per share. Long term debt to equity is a feasible 0.08. Earnings are expected to rise 70% this year and 9% over the next five years. Another impressive metric is the bank’s profit margin of 21%. This means that for every dollar the bank makes, it keeps compared to the industry average of 18%. This will help Great Southern continue to be more stable and financially sound during a downturn compared to its rivals. Additionally, Great Southern pays a 2.81% dividend, which is higher than the industry’s average of 2.08%. The bottom line here is Great Southern is a great regional bank that stands out from its competition.
Great Southern does come with some risks. Economists are predicating a recession in the coming years, which could affect banks more than 2008. While this is merely speculation, it is important to protect your holdings in the event that the prediction comes true. Luckily, Great Southern is a “brick and mortar” bank that focuses on traditional banking methods, so they should be able to whether any recession better than some of the bigger banks. The bottom line here is that in a late bull market it can be difficult to find “deals” and stocks that have decent valuations. Great Southern is a great, conservative bank stock that will continue to provide returns over the long haul.
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Nice figures. I was troubled about the debts but was consoled when I learned they were short-term ones.
The regional banks were overlooked in the turmoil of the financial crisis, but for the most part they suffered less than the big boys. Even now you have behemoths falling on their faces, like J. P. Morgan Chase’s massive trading losses (and the recently-revealed fact that it had trading desks betting against each other). Regional banks are generally solid and conservative, as GSBC is, and recession or not we’ll have to have banks. It’s not a flashy stock, but it’s a reliable one.
Agreed on regional banks being solid and reliable for the most part.
Regionals are the safest and most reliable when it comes to the finance sector. Dividends and stability are golden.
Unlike big banks, regional banks present a safer investment. In most cases, they are never in the cutting edge of the action and as such, don’t experience as much volatility with their stocks.