Zions Bancorporation, National Association (ZION), in Salt Lake City, Utah, is a leading financial services company in the United States, with $2.9 billion in annual net revenue in 2021 and more than $90 billion in total assets. The stock has gained 53.7% in price over the past year and 30.1% over the past six months.

The company’s board of directors authorized a share repurchase of up to $50 million for the first quarter of 2022, reflecting the company’s stable cash flow generating capabilities.

However, last month BofA Securities downgraded the stock to “Underperform from Neutral.” In addition, the company’s bleak growth prospects make its near-term prospects look uncertain.

Here is what could shape ZION’s performance in the near term:

Strong Profitability

ZION’s 35.4% net income margin is 17.2% higher than the 30.2% industry average. Also, its 6.3% CAPEX/Sales multiple is 283.7% higher than the 1.64% industry average. Also, its $634 million in cash from operations is 365.7% higher than the $136.14 million industry average.

Poor Growth Prospects

Analysts expect ZION’s EPS to decline 40% in the current quarter (ending March 2022) and 41.3% in the next quarter (ending June 2022). Also, the company’s sales growth is expected to remain negative in next quarter. Furthermore, the company failed to beat the Street’s EPS estimates in two trailing four quarters. In addition, ZION’s EPS is expected to decline at the rate of 32.4% per annum over the next five years.

POWR Ratings Reflect Uncertainty

ZION has an overall C rating, which equates to Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.

Our proprietary rating system also evaluates each stock based on eight distinct categories. ZION has a D grade for Growth. The company’s poor growth prospects are consistent with this grade.

Among the 37 stocks in the D-rated Pacific Regional Banks industry, ZION is ranked #25.

Beyond what I have stated above, one can view ZION ratings for Value, Stability, Momentum, and Sentiment Quality here.

Bottom Line

While the company possesses strong profitability and has exhibited impressive price performance over the past months, its near-term growth prospects could raise investors’ concerns. So, we believe investors should wait for the company’s prospects to stabilize before investing in the stock.

How Does Zions Bancorporation National Association (ZION) Stack Up Against its Peers?

While ZION has an overall C rating, one might want to consider its industry peers, OP Bancorp (OPBK), PCB Bancorp (PCB), and BayCom Corp (BCML), having an overall B (Buy) rating

ZION shares fell $0.54 (-0.80%) in premarket trading Tuesday. Year-to-date, ZION has gained 7.38%, versus a -5.27% rise in the benchmark S&P 500 index during the same period.

About the Author: Pragya Pandey

Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate. More...

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