At 6:36 $GEOFF mentions if you take ROE and divide that by P/B you get slightly above a 10-11% return for $BANR. Why is ROE divided by P/B the method he uses to derive a potential return from $BANR?
Book value is the same as equity. If you for example pay a P/B of 0.5 for the company, you buy the stocks at half the price of the equity. So since the company makes 5% return on their equity and you bought the equity at half the price you get doubble the return on YOUR investment. Hope you got it
I like EXSR (Exchange Bank, Santa Rosa). Great conservatively managed bank, controlled by a trust, so it is unlikely to ever get bought out. High local market share.
You have a great channel however I would be very cautious when it comes to recommending financial services companies like banks and insurance companies to novice investors as the risks are notoriously difficult to understand.
Price to book has to do with the quality of loans and their performance, if lot of bad loans are on the balance sheet and are not performing then the risk of the bank rises and ofcourse it will show on return on equity
$OZK Bank OZK formerly Bank of the Ozarks? Looks really attractive at first, then look into 2017 management changes, maybe SEC side stepping shenanigans, sounds like there is a lot of perceived risk in their loans... It would be interested to hear how you think through something like this. Leverage seems low. Historical growth was great pre 2017 (will that kill them?). Trades at 0.83 tangible book, < 7.5fcf (Not a stock tip)
FSFG went into mortgage origination and that increased their earnings for the last few years due to gain on sales of loans. Those are lower quality earnings though.
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At 6:36 $GEOFF mentions if you take ROE and divide that by P/B you get slightly above a 10-11% return for $BANR. Why is ROE divided by P/B the method he uses to derive a potential return from $BANR?
Book value is the same as equity. If you for example pay a P/B of 0.5 for the company, you buy the stocks at half the price of the equity. So since the company makes 5% return on their equity and you bought the equity at half the price you get doubble the return on YOUR investment. Hope you got it
I like EXSR (Exchange Bank, Santa Rosa). Great conservatively managed bank, controlled by a trust, so it is unlikely to ever get bought out. High local market share.
You have a great channel however I would be very cautious when it comes to recommending financial services companies like banks and insurance companies to novice investors as the risks are notoriously difficult to understand.
Price to book has to do with the quality of loans and their performance, if lot of bad loans are on the balance sheet and are not performing then the risk of the bank rises and ofcourse it will show on return on equity
$OZK Bank OZK formerly Bank of the Ozarks?
Looks really attractive at first, then look into 2017 management changes, maybe SEC side stepping shenanigans, sounds like there is a lot of perceived risk in their loans...
It would be interested to hear how you think through something like this.
Leverage seems low. Historical growth was great pre 2017 (will that kill them?).
Trades at 0.83 tangible book, < 7.5fcf
(Not a stock tip)
Oh and Geoff may like something like FRC (not cheap today but maybe someday)
FSFG went into mortgage origination and that increased their earnings for the last few years due to gain on sales of loans. Those are lower quality earnings though.
Cool to see you cover BankFinancial $BFIN. I bought the stock in summer 2020 due to how cheap it was.
Long SBERBANK Allways...