For retail investors with a generally bullish outlook on the market, regional banks offer what Equities.com quantitative analyst
This can be attractive to investors who like businesses that have a simpler correlation to the market itself. That is, when times are good, the regional bank can lend out more money and turn a higher revenue. When they're bad, they have to be more stingy.
We've previously looked at quality
To find the Midwestern bank stocks with the best fundamentals, we looked for companies that possessed the following attributes:
- Worth between
We decided to limit our search to small-cap banks, that are neither too small (and thus riskier) nor too large to have a reasonable expectation of ever experiencing exponential growth.
- Return on Investment (ROI) over 15 percent.
ROI shows how well a bank is using their invested capital. Since banks are essentially made up of all invested capital, this is an important statistic.
- Operating Margin over 25 percent.
Operating margin shows how efficiently a company is operating is business after a good is sold.
- Price-to-cash and price-to-book over 1.
A P/C and P/B of 1 should be the minimum floor for a regional bank.
- Analyst recommendation consensus of "buy" or better.
While we trust our metrics, it certainly never hurts to have experts on our side.
We found five small Midwestern region banks that possess all the aforementioned attributes. They are: