Please ensure Javascript is enabled for purposes of website accessibility
Free Article Join Over 1 Million Premium Members And Get More In-Depth Stock Guidance and Research

Instant Analysis: Bank of the Ozarks Notches a Q2 Earnings Beat

By Eric Volkman - Jul 13, 2016 at 12:04PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The bank breaks several second-quarter records in the process, but that probably won't erase concerns about its pricey stock.

What happened?

Bank of the Ozarks ( OZK 2.30% ) has a new set of records. The regional banking group released Q2 results that saw a new all-time high net profit for that particular quarter, at $54.5 million ($0.60). That bottom-line figure represented a substantial 22% improvement over the Q2 2015 bottom line of $44.8 million.

IMAGE SOURCE: GETTY IMAGES.

It was also rich enough to beat the market's expectations. On average, analysts were projecting a per-share profit of $0.57 for the quarter.

Bank of the Ozarks also broke its Q2 records for net interest, mortgage, and trust income.

On the top line, revenue zoomed 21% higher, largely on the back of that new high-water mark for net interest income.

Does it matter?

For most companies, posting a record-smashing quarter would likely result in investors flocking to its shares. But Bank of the Ozarks is not most companies -- the modest regional bank from Arkansas has been an overachiever for many years now. Thus, its investors consistently expect the exceptional, making it tough (if not nearly impossible) for the company to wow the market.

Even after a share-price pullback that started late last year, Bank of the Ozarks is an expensive stock. On a price-to-book basis (one of the most critical valuation metrics for banks), the company stands at 2.4; that's well higher than big incumbents Wells Fargo at 1.4 and Bank of America's 0.6. It even exceeds the figures of popular and successful regionals -- U.S. Bancorp stands at 1.7, while PNC Financial Services is sporting 0.98.

Bank of the Ozarks has been remarkably stable and consistent over the years, and has been adept at growing both organically and through acquisitions. But that high price-to-book ratio is obviously a concern for investors, particularly when compared to the solid investments in the sector like Wells Fargo, U.S. Bancorp, and PNC Financial Services that are available at relative discounts.

Though Bank of the Ozarks' second quarter was excellent, I believe many investors will still consider the stock to be too rich and hold off on the shares until they start better obeying gravity.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis – even one of our own – helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Bank of the Ozarks, Inc. Stock Quote
Bank of the Ozarks, Inc.
OZK
$45.73 (2.30%) $1.03
Bank of America Corporation Stock Quote
Bank of America Corporation
BAC
$44.15 (0.64%) $0.28
Wells Fargo & Company Stock Quote
Wells Fargo & Company
WFC
$48.81 (2.22%) $1.06
The PNC Financial Services Group, Inc. Stock Quote
The PNC Financial Services Group, Inc.
PNC
$199.96 (1.13%) $2.23
U.S. Bancorp Stock Quote
U.S. Bancorp
USB
$56.88 (2.32%) $1.29

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning service.

Stock Advisor Returns
624%
 
S&P 500 Returns
140%

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 12/06/2021.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Our Most Popular Articles

Premium Investing Services

Invest better with the Motley Fool. Get stock recommendations, portfolio guidance, and more from the Motley Fool's premium services.