Why Hilltop Holdings (HTH) Stock Is Plummeting In Aftermarket Trading Today

NEW YORK (TheStreet) -- Hilltop Holdings Inc (HTH) was down 8% to $22.13 in aftermarket trading Tuesday.

The decline comes following the announcement of an investigation by law firm Block & Leviton LLP into the SWS Group  (SWS) and Hilltop Holdings merger that was announced earlier in the day.

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The law firm said that it was investigating potential breaches of fiduciary duty by SWS Group's board of directors in connection with the merger. Hilltop Holdings shares were up 1.1% during day trading following the news of the merger.

"Block & Leviton's investigation seeks to determine, among other things, whether SWS directors breached their fiduciary duties by failing to maximize shareholder value in the proposed acquisition by Hilltop, the fairness by which the SWS directors considered and approved the transaction, and specifically whether Hilltop dominated the process through its significant holdings in the company," the law firm said in a statement.

SWS Group closed the day up 5.6% to $7.90.

TheStreet Ratings team rates HILLTOP HOLDINGS INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate HILLTOP HOLDINGS INC (HTH) a BUY. This is driven by some important positives, 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 robust revenue growth, impressive record of earnings per share growth, solid stock price performance, reasonable valuation levels and largely solid financial position with reasonable debt levels by most measures. We feel these strengths outweigh the fact that the company shows weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • HTH's very impressive revenue growth greatly exceeded the industry average of 13.6%. Since the same quarter one year prior, revenues leaped by 102.7%. Growth in the company's revenue appears to have helped boost the earnings per share.
  • HILLTOP HOLDINGS INC reported significant earnings per share improvement 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. We feel that this trend should continue. During the past fiscal year, HILLTOP HOLDINGS INC turned its bottom line around by earning $1.40 versus -$0.12 in the prior year. This year, the market expects an improvement in earnings ($1.43 versus $1.40).
  • Powered by its strong earnings growth of 161.53% and other important driving factors, this stock has surged by 69.14% over the past year, outperforming the rise in the S&P 500 Index during the same period. Looking ahead, the stock's sharp 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 other strengths this company displays justify these higher price levels.
  • Despite currently having a low debt-to-equity ratio of 0.36, it is higher than that of the industry average, inferring that management of debt levels may need to be evaluated further.
  • You can view the full analysis from the report here: HTH Ratings Report
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