Story updated at 10 a.m. to reflect market activity.
Texas Capital gained 0.4% to $55.47 in morning trading.
The firm set a price target of $63 for the regional bank. Deutsche Bank analysts cited Texas Capital's recent 14% sell-off as a reason for the upgrade.
Separately, TheStreet Ratings team rates TEXAS CAPITAL BANCSHARES INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:
"We rate TEXAS CAPITAL BANCSHARES INC (TCBI) a BUY. This is driven by several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its revenue growth, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company is trading at a premium valuation based on our review of its current price compared to such things as earnings and book value."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The revenue growth came in higher than the industry average of 13.2%. Since the same quarter one year prior, revenues slightly increased by 10.0%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
- The gross profit margin for TEXAS CAPITAL BANCSHARES INC is currently very high, coming in at 89.53%. Regardless of TCBI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, TCBI's net profit margin of 22.26% significantly outperformed against the industry.
- Compared to its closing price of one year ago, TCBI's share price has jumped by 39.96%, exceeding the performance of the broader market during that same time frame. We feel that the stock's sharp appreciation over the last year has driven it to a price level which is now somewhat expensive compared to the rest of its industry. The other strengths this company shows, however, justify the higher price levels.
- TEXAS CAPITAL BANCSHARES INC's earnings per share declined by 25.0% in the most recent quarter compared to the same quarter a year ago. The company has suffered a declining pattern of earnings per share over the past year. However, we anticipate this trend reversing over the coming year. During the past fiscal year, TEXAS CAPITAL BANCSHARES INC reported lower earnings of $2.73 versus $3.02 in the prior year. This year, the market expects an improvement in earnings ($2.90 versus $2.73).
- The change in net income from the same quarter one year ago has exceeded that of the Commercial Banks industry average, but is less than that of the S&P 500. The net income has decreased by 14.7% when compared to the same quarter one year ago, dropping from $33.14 million to $28.27 million.
- You can view the full analysis from the report here: TCBI Ratings Report
Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.