LegacyTexas Financial Group Inc Valuation – Initial Coverage $LTXB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – March 2017.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how LegacyTexas Financial Group Inc (LTXB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): LegacyTexas Financial Group, Inc. is a bank holding company. LegacyTexas Bank (the Bank) is the Company’s principal operating subsidiary, which is a commercial bank that is focused on meeting the needs of businesses and consumers in the North Texas area. Its principal business consists of attracting retail deposits from general public and business community and investing those funds, along with borrowed funds, in commercial real estate loans, secured and unsecured commercial and industrial loans, as well as permanent loans secured by first and second mortgages on one- to four-family residences and consumer loans. Its Warehouse Purchase Program allows mortgage banking company customers to close one- to four-family real estate loans in their own name and manage its cash flow needs until the loans are sold to investors. It offers title services, as well as brokerage services for purchase and sale of non-deposit investment and insurance products through a third-party brokerage arrangement.

LTXB Chart

LTXB data by YCharts

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[otw_shortcode_button href=”https://www.moderngraham.com/moderngraham-stocks-screens/” size=”medium” icon_position=”left” shape=”square”]Learn More About Premium Membership[/otw_shortcode_button]


Downloadable PDF version of this valuation:

ModernGraham Valuation of LTXB – July 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,805,433,977 Fail
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 893.22% Pass
5. Moderate PEmg Ratio PEmg < 20 21.28 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.97 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass


Stage 2: Determination of Intrinsic Value

EPSmg $1.77
MG Growth Estimate 15.00%
MG Value $68.27
Opinion Undervalued
MG Grade C-
MG Value based on 3% Growth $25.71
MG Value based on 0% Growth $15.07
Market Implied Growth Rate 6.39%
Current Price $37.74
% of Intrinsic Value 55.28%

LegacyTexas Financial Group Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the  small size, insufficient earnings stability over the last ten years, and the high PEmg ratio. The Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.79 in 2013 to an estimated $1.77 for 2017.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 6.39% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into LegacyTexas Financial Group Inc revealed the company was trading above its Graham Number of $30.53.  The company pays a dividend of $0.58 per share, for a yield of 1.5%  Its PEmg (price over earnings per share – ModernGraham) was 21.28, which was above the industry average of 20.84.

LegacyTexas Financial Group Inc receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $30.53
PEmg 21.28
PB Ratio 1.97
Dividend Yield 1.54%
TTM Dividend $0.58
Number of Consecutive Years of Dividend Growth 3


Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2017
Long-Term Debt & Capital Lease Obligation $964,350,000
Total Assets $8,436,542,000
Intangible Assets $178,559,000
Total Liabilities $7,536,625,000
Shares Outstanding (Diluted Average) 47,060,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.24
Dec2016 $2.09
Dec2015 $1.53
Dec2014 $0.81
Dec2013 $0.83
Dec2012 $0.98
Dec2011 $0.81
Dec2010 $0.59
Dec2009 $0.10
Dec2008 -$0.10
Dec2007 $0.14
Dec2006 $0.06
Dec2005 $1.43

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.77
Dec2016 $1.44
Dec2015 $1.08
Dec2014 $0.83
Dec2013 $0.79
Dec2012 $0.67
Dec2011 $0.44
Dec2010 $0.23
Dec2009 $0.14
Dec2008 $0.21
Dec2007 $0.35
Dec2006 $0.40
Dec2005 $0.48

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered the company. None.  This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

SunTrust Banks Inc Valuation – April 2017 $STI
Toronto-Dominion Bank Valuation – Initial Coverage $TSE:TD
Texas Capital Banchares Inc Valuation – Initial Coverage $TCBI
TCF Financial Corp Valuation – Initial Coverage $TCB
Canadian Western Bank Valuation – Initial Coverage $TSE:CWB
CVB Financial Corp Valuation – Initial Coverage $CVBF
Customers Bancorp Inc Valuation – Initial Coverage $CUBI
Comerica Inc Valuation – March 2017 $CMA
Sterling Bancorp Valuation – Initial Coverage $STL
S&T Bancorp Inc Valuation – Initial Coverage $STBA


The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.