This company reminds me a lot of OZRK, which was a smaller regional bank I researched a couple years ago which has since performed quite well. RBCAA is currently yielding about 22% on its earnings and the company has grown its BV at almost 13% annually over the last 10 years.
Their dividend payout is only about 13.6% which could be higher and the company also has a high D/E of about 6.7. However, the underlying cash flow generation is solid for a smaller regional bank with a market cap of only $421m. RBCAA generated about $151m in FCF ttm.
It was also promising to see that the chairman founded the company many years ago and still oversees it with his family today.
From a valuation standpoint, the company currently sells for about $20.10. I ran my valuation calculator and it gave me a conservative price of about $46. This was assuming a 25% MOS and a 15% required return.
However attractive this company looks, I still have to research their 10-K's and delve deeper into the management's discussion. Also, it is a very volatile time to invest in the financial sector. Even though it is highly unlikely that a debt ceiling plan will not be passed, the present uncertainty could be more favorable for the patient investor to wait for a potentially stronger investment entry point.
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