Small Bank Boasts Cheap Shares, 'Buy' Ratings

Some analysts expect Broadpoint Gleacher shares to double.

Author:: Jake Lynch
Publish date:: Apr 16, 2010 5:00 AM EDT

NEW YORK (TheStreet) -- The 10 stocks in our Under-the-Radar portfolio have gained 16% since Feb. 26, beating the 9.9% advance of the S&P 500 Index.

We're adding

Broadpoint Gleacher Securities

(BPSG)

, a New York-based boutique investment bank, to the portfolio.

TheStreet

upgraded the stock to "buy" last week. The five analysts that cover Broadpoint also rate its shares "buy." With a median price target of $7.33, the stock could increase 76%.

Fourth-quarter earnings rose fivefold to $9.8 million, or 8 cents a share, as revenue grew 55% to $85 million. The operating margin expanded from 11% to 21%. Revenue from debt and equity capital markets declined, but investment banking revenue jumped fivefold to $13 million. During the past three years, Broadpoint has increased revenue 64% annually, on average, and boosted net income 48% a year.

Shrewd acquisitions have helped Broadpoint expand. The company just received regulatory approval to buy London-based

ISM Capital

. It bought rival Gleacher Partners in June in a deal that did little damage to its balance sheet. Broadpoint holds $25 million of cash and $99 million of debt, translating to a debt-to-equity ratio of 0.3, less than the industry average.

Broadpoint's stock is exceptionally cheap. It trades at a price-to-earnings ratio of 8 and a price-to-sales ratio of 1.5, at least 50% less than industry averages. Broadpoint has received a financial strength score of 7 out of 10 from

TheStreet's

quantitative model. The stock has risen 6% during the past year, but has gained an average of 35%, annually, since 2007.

During the fourth quarter, 12 of Broadpoint's 20 largest shareholders boosted their bets, while four cut holdings and four left their positions unchanged.

Sandler O'Neill

offers the loftiest price target, predicting the stock to double to $10.

Keefe, Bruyette & Woods

(KBW)

expects the stock to rise 91% to $8 and

Bank of America

(BAC) - Get Report

foresees it gaining 67% to $7.

TheStreet Ratings

recommended Broadpoint in a story on Aug. 3. The stock gained 45% between the recommendation and its 52-week high on Oct. 14. The shares fell to a 52-week low on Feb. 5, but have since climbed 11%. This out-of-favor small-cap stock is overdue for a rebound. We are adding it to the portfolio and advise consideration.

-- Reported by Jake Lynch in Boston.