BUSINESS
Eagle Bancorp, Inc. operates as the bank holding company for EagleBank that provides commercial and consumer banking services primarily in the United States. The company also offers various commercial and consumer lending products comprising commercial loans for working capital, equipment purchases, real estate lines of credit, and government contract financing; asset based lending and accounts receivable financing; construction and commercial real estate loans; business equipment financing; consumer home equity lines of credit, personal lines of credit, and term loans; consumer installment loans, such as auto and personal loans; personal credit cards; and residential mortgage loans.
INVESTMENT RATING
EGBN’s future returns on capital are forecasted to exceed the cost of capital. Accordingly, the company is expected to continue to be a modest Value Builder.
Eagle Bancorp has a current Value Trend Rating of A (Highest Rating).
With this rating, PTR’s two proprietary measures of a stock’s current attractiveness are providing inconsistent signals. Eagle Bancorp has a neutral Power Rating of 60 but a very high Appreciation Score of 90, resulting in the Highest Value Trend Rating.
Eagle Bancorp’s stock is selling well below targeted value. The current stock price of $22.25 compares to targeted value 12 months forward of $73.
Eagle Bancorp’s very high appreciation potential results in an appreciation score of 90 (only 10% of the universe has greater appreciation potential.)
Eagle Bancorp has a Power Rating of 60. (This neutral Power Rating indicates that EGBN’s chances of enjoying attractive investment performance over the near to intermediate term are only average.)
Factors contributing to this neutral Power Rating include: the Commercial Banks comparison group is in a strong phase currently; and recent price action has been slightly favorable. An offsetting factor is earnings estimate behavior for EGBN has been slightly negative recently.
INVESTMENT PROFILE
EGBN’s financial strength is high. Financial strength rating is 83.
Relative to the S&P 500 Composite, Eagle Bancorp Inc has significant Value characteristics; its appeal is likely to be to investors heavily oriented toward Income; the perception is that EGBN is lower risk. Relative weaknesses include: low forecasted profitability, and low historical growth. EGBN’s valuation is low: high dividend yield, low P/E ratio, and low price/book ratio. EGBN has unusually low market capitalization.
CURRENT SIGNALS
Eagle Bancorp’s current operations are eroding. Return on equity is falling, reflecting: declining pretax margin; and falling leverage.
Eagle Bancorp’s current technical position is mixed. The stock price is in a 2.8 month down move. The stock has declined 21.8% from its prior high. The 200 day moving average is in an uptrend. The stock price is below its 200 day moving average. The 200 day moving average has just turned up.
ALERTS
Eagle Bancorp Inc (NASDAQ: EGBN) has recently enjoyed meaningful positive changes in investment behavior: its longer term price trend turned up.
Positive development: significant quarterly sales acceleration occurred. Negative development: the consensus estimate for December, 2025 decreased significantly.
The stock is currently rated A.
Eagle Bancorp Inc (NASDAQ: EGBN) stock closed at $22.25 on 4/2/24 after a decline of -2.2%. However, unusually low trading volume at 58% of normal accompanied the decline. The stock has performed in line with the market over the last nine months and is unchanged during the last week.
CASH FLOW
In 2023, Eagle Bancorp generated a very significant increase in cash of +$410.8 million (+132%). Sources of cash were much larger than uses. Cash generated from 2023 EBITDA totaled +$182.1 million. Non-operating uses consumed -$51.1 million (-28% of EBITDA). Cash taxes consumed -$27.0 million (-15% of EBITDA). Withdrawal of investment from the business totaled +$46.8 million (+26% of EBITDA). On a net basis, debt investors contributed +$314.6 million (+173% of EBITDA) while equity investors withdrew -$54.6 million (-30% of EBITDA).
Eagle Bancorp’s Non-operating Income, %EBITDA has experienced a small downtrend over the period. This downtrend was accompanied by an opposite trend for the Eagle Bancorp Peer Group. (Since 2021 Non-operating Income, %EBITDA has accelerated sharply.) In most years, Eagle Bancorp was in the top quartile. Currently, Eagle Bancorp is slightly below median at -28% of EBITDA (-$51.1 million).
Eagle Bancorp’s Cash Taxes, %EBITDA has exhibited a minor overall uptrend over the period. This improvement was accompanied by a similar trend for the Eagle Bancorp Peer Group. In most years, Eagle Bancorp was in the third quartile and lower quartile. Currently, Eagle Bancorp is at median at -15% of EBITDA (-$27.0 million).
Eagle Bancorp’s Business Re-investment, %EBITDA has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Eagle Bancorp Peer Group. In most years, Eagle Bancorp was in the top quartile and lower quartile. Currently, Eagle Bancorp is at median at +26% of EBITDA (+$46.8 million).
Eagle Bancorp’s Debt Investors, %EBITDA has experienced a volatile overall uptrend over the period. This improvement was accompanied by an opposite trend for the Eagle Bancorp Peer Group. In most years, Eagle Bancorp was in the top quartile and lower quartile. Currently, Eagle Bancorp is upper quartile at +173% of EBITDA (+$314.6 million).
Eagle Bancorp’s Equity Investors, %EBITDA has suffered a very strong overall downtrend over the period. This downtrend was accompanied by a similar trend for the Eagle Bancorp Peer Group. In most years, Eagle Bancorp was in the second quartile and lower quartile. Currently, Eagle Bancorp is lower quartile at -30% of EBITDA (-$54.6 million).
Eagle Bancorp’s Change in Cash, %EBITDA has exhibited a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Eagle Bancorp Peer Group. In most years, Eagle Bancorp was in the top quartile and lower quartile. Currently, Eagle Bancorp is at the upper quartile at +226% of EBITDA (+$410.8 million).
Eagle Bancorp’s Cash, %Revenue has enjoyed a volatile overall uptrend over the period. This improvement was accompanied by a similar trend for the Eagle Bancorp Peer Group. In most years, Eagle Bancorp was in the second quartile and top quartile. Currently, Eagle Bancorp is at median at +112%.
PROFITABILITY
Eagle Bancorp’s return on equity has eroded modestly since 2014. The current level of 7.9% is at the low for the period and is -20.2% from the high.
This modest erosion was due to very strong negative trend in pretax operating return offset by strong positive trend in non-operating factors.
The productivity of Eagle Bancorp’s assets rose over the full period 2014-2023: 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 very strong overall downtrend that accelerated very sharply from the 2021 level.
Non-operating factors (income taxes and financial leverage) had a significant positive influence on return on equity.
Eagle Bancorp’s return on equity is lower quartile (7.9%) for the four quarters ended December, 2023.
Operating performance (pretax return on assets) is lower quartile (1.1%) reflecting asset turnover that is at median (0.06X) and lower quartile pretax margin (19.7%).
Tax “keep” rate (income tax management) is at the upper quartile (78.8%) resulting in after tax return on assets that is lower quartile.
Financial leverage (leverage) is at the upper quartile (9.15X).
GROWTH RATES
Overall, Eagle Bancorp’s growth rate has slowed very considerably in recent years.
Eagle Bancorp’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 10.8% per year. (More recently it has been 22.3%.)
Total asset growth has been 9.7% per year. (More recently it has been 2.7%.)
Annual E.P.S. growth has been 4.0% per year. (More recently it has been -24.5%.)
Equity growth has been 8.8% per year. (More recently it has been 1.8%.)
No consensus growth rate forecast is available for Eagle Bancorp.
Relative to the Eagle Bancorp Peer Group, Eagle Bancorp’s historical growth measures are erratic. Revenue growth (10.8%) has been at the upper quartile. Total asset growth (9.7%) has been at the upper quartile. Equity growth (8.8%) has been at median. E.P.S. growth (4.0%) has been lower quartile.
Consensus growth forecast is unavailable.
PRICE HISTORY
Over the full time period, Eagle Bancorp’s stock price performance has been variable and significantly below market. Between June, 2013 and April, 2024, Eagle Bancorp’s stock price fell -1%; relative to the market, this was a -69% loss. Significant price moves during the period: 1) January, 2022 – May, 2023: -67%; and 2) September, 2020 – January, 2022: +124%.
TOTAL INVESTMENT RETURNS
Current annual total return performance of -41.4% is lower quartile relative to the S&P 500 Composite.
In addition to being lower quartile relative to S&P 500 Composite, current annual total return performance through February, 2024 of -41.4% is lower quartile relative to Eagle Bancorp Inc Peer Group.
Current 5-year total return performance of -13.7% is lower quartile relative to the S&P 500 Composite.
Through February, 2024, with lower quartile current 5-year total return of -13.7% relative to S&P 500 Composite, Eagle Bancorp’s total return performance is lower quartile relative to Eagle Bancorp Inc Peer Group.
VALUATION BENCHMARKS
Relative to S&P 500 Composite, EGBN’s overall valuation is quite low. The highest factor, the ratio of enterprise value/revenue, is below median. Ratio of enterprise value/earnings before interest and taxes is below median. Price/earnings ratio is lower quartile. Price/equity ratio is lower quartile. The lowest factor, the ratio of enterprise value/assets, is lower quartile.
Relative to Eagle Bancorp Peer Group, EGBN’s overall valuation is low. The highest factor, the ratio of enterprise value/earnings before interest and taxes, is upper quartile. Ratio of enterprise value/assets is at median. Ratio of enterprise value/revenue is below median. Price/earnings ratio is lower quartile. The lowest factor, the price/equity ratio, is lower quartile.
Eagle Bancorp has a major value gap compared to the median valuation. For EGBN to rise to median valuation, its current ratio of enterprise value/revenue would have to rise from the current level of 3.23X to 3.58X. If EGBN’s ratio of enterprise value/revenue were to rise to 3.58X, its stock price would be lower by $8 to $30.
For EGBN to hit lower quartile valuation relative to the Eagle Bancorp Peer Group, its current ratio of enterprise value/revenue would have to fall from the current level of 3.23X to 2.81X. If EGBN’s ratio of enterprise value/revenue were to fall to 2.81X, its stock price would decline by $-9 from the current level of $22.
VALUE TARGETS
EGBN’s future returns on capital are forecasted to exceed the cost of capital. Accordingly, the company is expected to continue to be a modest Value Builder.
Eagle Bancorp’s current Price Target of $80 represents a +257% change from the current price of $22.25.
This very high appreciation potential results in an appreciation score of 90 (only 10% of the universe has greater appreciation potential.)
With this high Appreciation Score of 90, the neutral Power Rating of 60 results in an Value Trend Rating of A.
Eagle Bancorp’s current Price Target is $80 (-21% from the 2023 Target of $100 but +257% from the 04/02/24 price of $22.25). This fall in the Target is the result of a +7% increase in the equity base and a -26% decrease in the price/equity multiple. The forecasted decline in return on equity has a very large negative impact on the price/equity multiple and the forecasted decline in growth has a slight negative impact as well. Partially offsetting these Drivers, the forecasted decline in cost of equity has a very large positive impact.
PTR’s return on equity forecast is 5.7% — slightly below our recent forecasts. Forecasted return on equity suffered a dramatic, erratic decline between 2015 and 2023. The current forecast is well below the 2018 peak of 13%.
PTR’s growth forecast is 10.0% — slightly below our recent forecasts. Forecasted growth exhibited a slight, erratic decline between 2015 and 2023. The current forecast is below the 2016 peak of 14%.
PTR’s cost of equity forecast is 4.7% — in line with recent levels. Forecasted cost of equity erratic but little changed between 2015 and 2023. The current forecast is below the 2018 peak of 9.3%.
At Eagle Bancorp’s current price of $22.25, investors are placing a negative value of $-22 on its future investments. This view is not supported by the company’s most recent performance that reflected a growth rate of 13.0% per year, and a return on equity of 9.1% versus a cost of equity of 6.7%.
PTR’s 2025 Price Target of $80 is based on these forecasts and reflects an estimated value of existing assets of $33 and a value of future investments of $46.
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