BUSINESS
Banco Latinoamericano de Comercio Exterior, S. A., a multinational bank, primarily engages in the financing of foreign trade in Latin America and the Caribbean. The company operates through two segments, Commercial and Treasury. It offers short and medium-term bilateral loans, structured and syndicated credits, and loan commitments; financial guarantee contracts, such as issued and confirmed letters of credit, and stand-by letters of credit; and guarantees covering commercial risk and other assets, as well as co-financing arrangements, underwriting of syndicated credit facilities, structured trade financing in the form of factoring and vendor financing, and financial leasing. The company also provides treasury solutions, including term deposits and private placements. It primarily serves financial institutions, corporations, and sovereigns and state-owned entities.
INVESTMENT RATING
BLX is expected to continue to be a modest Value Builder reflecting capital returns that are forecasted to be above the cost of capital.
Banco Latinoamericano de Comerci has a current Value Trend Rating of A (Highest Rating).
The Value Trend Rating reflects highly consistent signals from PTR’s two proprietary measures of a stock’s attractiveness. Banco Latinoamericano de Comerci has a good Power Rating of 82 and a very high Appreciation Score of 86, triggering the Highest Value Trend Rating.
Banco Latinoamericano de Comerci’s stock is selling well below targeted value. The current stock price of $27.40 compares to targeted value 12 months forward of $85.
Banco Latinoamericano de Comerci’s very high appreciation potential results in an appreciation score of 86 (only 14% of the universe has greater appreciation potential.)
Banco Latinoamericano de Comerci has a Power Rating of 82. (This good Power Rating indicates that BLX has a better chance of achieving attractive investment performance over the near to intermediate term than all but 18% of companies in the universe.)
Factors contributing to this good Power Rating include: the Commercial Banks comparison group is in a strong phase currently; and recent price action has been favorable.
INVESTMENT PROFILE
BLX’s financial strength is average. Financial strength rating is 52.
Relative to the S&P 500 Composite, Banco Latinoamericano de Comerci has moderate Value characteristics; its appeal is likely to be to investors heavily oriented toward Income; the perception is that BLX is higher risk. High expected growth is a positive for BLX. Relative weaknesses include: low forecasted profitability, low historical profitability, low financial strength, high financial leverage, and low historical growth. BLX’s valuation is low: high dividend yield, low P/E ratio, and low price/book ratio. BLX has unusually low market capitalization.
CURRENT SIGNALS
Banco Latinoamericano de Comerci’s current operations are strong. Return on equity is rising, reflecting: improving asset utilization; and rising tax keep rate.
Banco Latinoamericano de Comerci’s current technical position is very strong. The stock price is in a 20.5 month up move. The stock has appreciated 109.8% from its prior low. The stock price is above its 200 day moving average which is in an uptrend.
ALERTS
Extremely significant positive changes in Banco Latinoamericano de Comerci (NYSE: BLX) investment behavior have recently occurred: the stock rose on very heavy volume, and its shorter term price trend turned up.
Recent meaningful positive changes in fundamentals have benefitted Banco Latinoamericano de Comerci (NYSE: BLX): significant quarterly earnings acceleration occurred, and significant quarterly sales acceleration occurred.
The stock is currently rated A.
On 2/26/24, Banco Latinoamericano de Comerci (NYSE: BLX) stock rose modestly by 0.4%, closing at $27.40. Moreover, trading volume in this advance was exceptionally high at 345% of normal. The stock has been strong relative to the market over the last nine months and has risen 14.8% during the last week.
CASH FLOW
In 2022, Banco Latinoamericano de Comerci experienced no change in cash of -$11.5 million (-1%). Sources of cash balanced uses. Cash generated from 2022 EBITDA totaled +$112.9 million. Non-operating uses consumed -$18.2 million (-16% of EBITDA). In 2022, there were no cash taxes paid. Re-investment in the business amounted to -$1,076.1 million (-953% of EBITDA). On a net basis, debt investors supplied +$984.3 million (+872% of EBITDA) while equity investors pulled out -$14.5 million (-13% of EBITDA).
BLX’s Non-operating Income, %EBITDA has experienced a downtrend over the period. This downtrend was accompanied by stability for the Banco Latinoamericano De Comerci Peer Group. In most years, Banco Latinoamericano de Comerci was in the top quartile. Currently, Banco Latinoamericano de Comerci is upper quartile at -16% of EBITDA (-$18.2 million).
BLX’s Cash Taxes, %EBITDA has exhibited little to no overall change over the period. This stability was accompanied by an uptrend for the Banco Latinoamericano De Comerci Peer Group. In most years, Banco Latinoamericano de Comerci was in the top quartile. Currently, Banco Latinoamericano de Comerci is upper quartile at 0% of EBITDA ( $0.0 million).
BLX’s Business Re-investment, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by an opposite trend for the Banco Latinoamericano De Comerci Peer Group. (Since 2020 Business Re-investment, %EBITDA has accelerated very sharply.) In most years, Banco Latinoamericano de Comerci was in the lower quartile and top quartile. Currently, Banco Latinoamericano de Comerci is lower quartile at -953% of EBITDA (-$1,076.1 million).
BLX’s Debt Investors, %EBITDA has experienced a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Banco Latinoamericano De Comerci Peer Group. In most years, Banco Latinoamericano de Comerci was in the top quartile and lower quartile. Currently, Banco Latinoamericano de Comerci is upper quartile at +872% of EBITDA (+$984.3 million).
BLX’s Equity Investors, %EBITDA has suffered a volatile overall downtrend over the period. This downtrend was accompanied by a similar trend for the Banco Latinoamericano De Comerci Peer Group. In most years, Banco Latinoamericano de Comerci was in the lower quartile and third quartile. Currently, Banco Latinoamericano de Comerci is below median at -13% of EBITDA (-$14.5 million).
BLX’s Change in Cash, %EBITDA has experienced a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Banco Latinoamericano De Comerci Peer Group. In most years, Banco Latinoamericano de Comerci was in the top quartile and lower quartile. Currently, Banco Latinoamericano de Comerci is below median at -10% of EBITDA (-$11.5 million).
BLX’s Cash, %Revenue has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Banco Latinoamericano De Comerci Peer Group. In most years, Banco Latinoamericano de Comerci was in the top quartile. Currently, Banco Latinoamericano de Comerci is upper quartile at +353%.
PROFITABILITY
BLX’s return on equity has eroded modestly since 2013. The current level of 13.8% is 1.40X the low for the period and is at the high.
This modest erosion was due to strong negative trend in pretax operating return and very minor positive trend in non-operating factors.
The productivity of BLX’s assets rose over the full period 2013-2023: asset turnover has exhibited a volatile overall uptrend that accelerated very sharply after the 2021 level.
More than offsetting this trend, however, pretax margin experienced a strong overall downtrend although it experienced a very sharp recovery after the 2021 low.
Non-operating factors (income taxes and financial leverage) had a very small positive influence on return on equity.
BLX’s return on equity is at the upper quartile (13.8%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is below median (1.1%) reflecting asset turnover that is lower quartile (0.05X) and slightly below median pretax margin (23.7%).
Tax “keep” rate (income tax management) is upper quartile (138.7%) resulting in after tax return on assets that is upper quartile.
Financial leverage (leverage) is at the lower quartile (8.92X).
GROWTH RATES
There are no significant differences between Banco Latinoamericano de Com’s longer term growth and growth in recent years.
Banco Latinoamericano de Com’s historical income statement growth has been in line with balance sheet growth. Revenue growth has paralleled asset growth; earnings growth has paralleled equity growth.
Annual revenue growth has been 4.5% per year.
Total asset growth has been 2.7% per year. (More recently it has been 22.4%.)
Annual E.P.S. growth has been -1.5% per year. (More recently it has been 20.5%.)
Equity growth has been 2.9% per year.
No consensus growth rate forecast is available for Banco Latinoamericano de Com.
Relative to the Banco Latinoamericano De Comerci Peer Group, Banco Latinoamericano de Comerci historical growth measures are erratic. Revenue growth (4.5%) has been below median. Equity growth (2.9%) has been substantially below median. E.P.S. growth (-1.5%) has been lower quartile. Total asset growth (2.7%) has been lower quartile.
Consensus growth forecast is unavailable.
PRICE HISTORY
Over the full time period, Banco Latinoamericano de Comerci! stock price performance has been significantly below market. Between April, 2013 and February, 2024, Banco Latinoamericano de Comerci! stock price rose +21%; relative to the market, this was a -62% loss. Significant price moves during the period: 1) September, 2022 – February, 2024: +110%; and 2) April, 2019 – March, 2020: -52%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of 46.5% is upper quartile relative to the S&P 500 Composite.
In addition to being upper quartile relative to S&P 500 Composite, current annual total return performance through January, 2024 of 46.5% is upper quartile relative to Banco Latinoamericano de Comerci Peer Group.
Current 5-year total return performance of 12.2% is above median relative to the S&P 500 Composite.
Through January, 2024, with above median current 5-year total return of 12.2% relative to S&P 500 Composite, Banco Latinoamericano de Comerci total return performance is upper quartile relative to Banco Latinoamericano de Comerci Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, BLX’s overall valuation is normal. The highest factor, the ratio of enterprise value/revenue, is upper quartile. Ratio of enterprise value/earnings before interest and taxes is upper quartile. Ratio of enterprise value/assets is lower quartile. Price/equity ratio is lower quartile. The lowest factor, the price/earnings ratio, is lower quartile.
Relative to Banco Latinoamericano de Comerci Peer Group, BLX’s overall valuation is high. The highest factor, the ratio of enterprise value/assets, is upper quartile. Ratio of enterprise value/earnings before interest and taxes is upper quartile. Ratio of enterprise value/revenue is upper quartile. Price/equity ratio is at the lower quartile. The lowest factor, the price/earnings ratio, is lower quartile.
Banco Latinoamericano de Comerci has a major value gap compared to the median valuation. For BLX to achieve median valuation, its current ratio of enterprise value/revenue would have to fall from the current level of 7.85X to 3.52X. If BLX’s ratio of enterprise value/revenue were to fall to 3.52X, its stock price would be lower by $-99 to $-72.
For BLX to fall to lower quartile valuation relative to the Banco Latinoamericano de Comerci Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 7.85X to 3.10X. If BLX’s ratio of enterprise value/revenue were to fall to 3.10X, its stock price would decline by $-109 from the current level of $27.
VALUE TARGETS
BLX is expected to continue to be a modest Value Builder reflecting capital returns that are forecasted to be above the cost of capital.
Banco Latinoamericano de Comerci current Price Target of $83 represents a +205% change from the current price of $27.40.
This very high appreciation potential results in an appreciation score of 86 (only 14% of the universe has greater appreciation potential.)
Reinforcing this high Appreciation Score of 86, the high Power Rating of 82 contributes to an Value Trend Rating of A.
Banco Latinoamericano de Comerci current Price Target is $83 (+60% from the 2022 Target of $52 and +205% from the 02/26/24 price of $27.40). This dramatic rise in the Target is the result of a +21% increase in the equity base and a +32% increase in the price/equity multiple. The forecasted increase in growth has a very large positive impact on the price/equity multiple and the forecasted increase in return on equity has a very large positive impact as well. Partially offsetting these Drivers, the forecasted increase in cost of equity has a very large negative impact.
PTR’s return on equity forecast is 7.7% — in line with our recent forecasts. Forecasted return on equity suffered a dramatic, erratic decline between 2014 and 2022. The current forecast is below the 2015 peak of 12%.
PTR’s growth forecast is 10.0% — substantially above our recent forecasts. Forecasted growth suffered a dramatic, steady decline between 2014 and 2022. The current forecast is steady at the 2014 peak of 8%.
PTR’s cost of equity forecast is 5.2% — in line with recent levels. Forecasted cost of equity enjoyed a dramatic, variable decline between 2014 and 2022. The current forecast is well below the 2015 peak of 11.8%.
At Banco Latinoamericano de Comerci! current price of $27.40, investors are placing a negative value of $-5 on its future investments. This view is not supported by the company’s most recent performance that reflected a growth rate of 0.0% per year, and a return on equity of 6.0% versus a cost of equity of 3.5%.
PTR’s 2024 Price Target of $83 is based on these forecasts and reflects an estimated value of existing assets of $38 and a value of future investments of $45.
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