Towne Bank Inc. Stock Upgraded (TOWN)

NEW YORK ( TheStreet) -- Towne Bank (Nasdaq: TOWN) has been upgraded by TheStreet Ratings from hold to buy. The company's strengths can be seen in multiple areas, such as its revenue growth, impressive record of earnings per share growth, increase in net income, expanding profit margins and solid stock price performance. We feel these strengths outweigh the fact that the company shows weak operating cash flow.

Highlights from the ratings report include:
  • The revenue growth greatly exceeded the industry average of 24.9%. Since the same quarter one year prior, revenues slightly increased by 5.7%. This growth in revenue appears to have trickled down to the company's bottom line, improving the earnings per share.
  • TOWNEBANK has improved earnings per share by 30.0% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past two years. During the past fiscal year, TOWNEBANK increased its bottom line by earning $0.76 versus $0.71 in the prior year.
  • The net income growth from the same quarter one year ago has exceeded that of the S&P 500 and greatly outperformed compared to the Commercial Banks industry average. The net income increased by 13.6% when compared to the same quarter one year prior, going from $8.30 million to $9.44 million.
  • The gross profit margin for TOWNEBANK is currently very high, coming in at 81.40%. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, TOWN's net profit margin of 15.00% significantly trails the industry average.
  • Compared to where it was a year ago today, the stock is now trading at a higher level, reflecting both the market's overall trend during that period and the fact that the company's earnings growth has been robust. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry. We feel, however, that the other strengths this company displays justify these higher price levels.

TowneBank, through its subsidiaries, provides retail and commercial banking products and services in the Greater Hampton Roads region in southeastern Virginia. The company operates in three segments: Banking, Realty, and Insurance. The company has a P/E ratio of 16.2, below the average banking industry P/E ratio of 17.5 and below the S&P 500 P/E ratio of 17.7. Towne has a market cap of $409.1 million and is part of the financial sector and banking industry. Shares are up 9.9% year to date as of the close of trading on Tuesday.

You can view the full Towne Ratings Report or get investment ideas from our investment research center.

-- Written by a member of TheStreet Ratings Staff

TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.
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