For many investors, investing during a bear market means staying away from small-cap stocks. That could be a mistake as these stocks are the ones that often lead the way when the market reverses. And...spoiler alert...the market always does turnaround.
Nevertheless, quality still matters, and it matters even more when investing in companies with a small market cap. With that in mind, The Bancorp (NASDAQ: TBBK) is a small-cap regional bank that appears to be well-positioned for whatever happens in 2023.
This article will introduce you to The Bancorp and explain why it may deserve a place on your 2023 watchlist.
An Emerging Name Among Regional Banks
The Bancorp may not be a household name when it comes to regional banks, but that could be changing. The company operates as the financial holding company for The Bancorp Bank. That bank provides a portfolio of banking products and services made up of fintech solutions, institutional banking, commercial lending, and real estate bridge lending.
Although you may not have a credit or debit card with The Bancorp name, chances are that it may underwrite one of the many private label companies you’ve heard about and may get offers from. The company is the number one issuer of prepaid cards in the United States.
In August 2022, the Bank Director 2022 Ranking Banking study, ranked The Bancorp Bank as the number one bank among those with assets between $5 billion to $50 billion. The bank’s ranking was measured by its return on equity and assets, asset quality, capital adequacy and total shareholder return.
A Profitable Bank That is Showing Growth
In its most recent quarter, The Bancorp missed analyst expectations for revenue and earnings. But some context is important. The company has delivered revenue and earnings in the first three quarters that are higher on a year-over-year (YOY) basis. For the first three quarters, the company is ahead of 2021’s revenue pace by 5% and is ahead in terms of earnings per share (EPS) by 10%.
TBBK Stock is One for the Watchlist
As we get into the home stretch of 2022, it's a good time to take a critical look at your portfolio. Weeding out underperforming stocks is often the easy part. Replacing them is a different matter altogether.
The consensus in the financial media is that there will be a recession of unknown length and severity in 2023. Of course, there are also those that believe we’re already in one. Either way, investors are likely to be dealing with higher interest rates in 2023. This makes financial stocks attractive.
But the risk of financial stocks comes from the lending side of the business. That’s another reason to look at The Bancorp. The company has a history of having a loan portfolio with low credit losses
TBBK stock is not heavily covered by analysts. However, the two analysts that are tracked by MarketBeat give the stock a buy rating with a price target that gives investors the potential for a 26% upside. That kind of gain, along with a P/E ratio of just around 13x earnings and a forward P/E ratio of around 12x makes up for the lack of a dividend and makes The Bancorp one to have on your 2023 watchlist.
