Why TFS Financial (TFSL) Stock Hit a One-Year High Today

NEW YORK (TheStreet) -- TFS Financial Corp.  (TFSL) rose to a one-year high of $12.92 as of noon on Monday after it announced the Memoranda of Understanding on the company had been lifted.

The memoranda, which the company had entered into with the Office of Thrift Supervision on Feb. 7, 2011, involved enterprise risk management procedures and restricted TFS Financial's ability to pay a dividend or to repurchase its own stock.

The company also announced its fifth stock repurchase program, in which TFS Financial will buy back up to 5 million shares. The program will start Wednesday at the earliest. The company is also looking into regulatory procedures to reinstate a dividend.

TFS is the holding company for Third Federal Savings & Loan Association of Cleveland.

"This is a day of sunshine and blue skies for Third Federal, our customers and our stockholders," said Marc A. Stefanski, chairman and CEO of Third Federal, in a statement. "This exciting news means we can resume our three-prong approach to providing greater value to our stockholders. We will be implementing a new stock buy-back plan, working on the requirements to reinstate a regular dividend, and continuing our efforts to grow Third Federal. Thanks to the dedication of our associates, the loyalty of our customers, and the patience of our stockholders, our future looks bright."

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TheStreet Ratings team rates TFS FINANCIAL CORP as a "buy" with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate TFS FINANCIAL CORP (TFSL) a BUY. This is driven by a number of strengths, 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 impressive record of earnings per share growth, compelling growth in net income, expanding profit margins, notable return on equity and increase in stock price during the past year. 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:

  • TFS FINANCIAL CORP has improved earnings per share by 25.0% 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. We feel that this trend should continue. During the past fiscal year, TFS FINANCIAL CORP increased its bottom line by earning $0.18 versus $0.03 in the prior year. This year, the market expects an improvement in earnings ($0.21 versus $0.18).
  • The company, on the basis of net income growth from the same quarter one year ago, has significantly outperformed against the S&P 500 and exceeded that of the Thrifts & Mortgage Finance industry average. The net income increased by 43.7% when compared to the same quarter one year prior, rising from $11.15 million to $16.02 million.
  • The gross profit margin for TFS FINANCIAL CORP is rather high; currently it is at 68.17%. It has increased significantly from the same period last year. Regardless of the strong results of the gross profit margin, the net profit margin of 16.33% trails the industry average.
  • The revenue fell significantly faster than the industry average of 26.3%. Since the same quarter one year prior, revenues slightly dropped by 9.7%. The declining revenue has not hurt the company's bottom line, with increasing earnings per share.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Thrifts & Mortgage Finance industry and the overall market on the basis of return on equity, TFS FINANCIAL CORP underperformed against that of the industry average and is significantly less than that of the S&P 500.
  • You can view the full analysis from the report here: TFSL Ratings Report

STOCKS TO BUY: TheStreet Quant Ratings has identified a handful of stocks that can potentially TRIPLE in the next 12 months. Learn more.

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.

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