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Research Report

This residential financing company is a hit with Validea's model portfolios Add to ...

Validea’s pick of the week provides a detailed report on a company that scores well in the stock-screening service’s model portfolios. On Validea.ca, investors can analyze 1,000 Canadian stocks through 12 different guru-based models and get individual reports on each company. Globe Investor has a distribution agreement with Validea.ca. Try it.

BofI - short for "Bank of Internet" - is the holding company for BofI Federal Bank, a diversified nationwide bank that provides financing for single and multifamily residential properties, small-to-medium size businesses in target sectors, and selected specialty finance receivables. Though it has just one location - in San Diego - its internet business allows it to have approximately $3.3-billion (U.S.) in assets and approximately 40,000 retail deposit and loan customers across all 50 states. It has a market cap of $1.2-billion.

BofI has increased EPS in all but two years of the past decade, which the Warren Buffett-inspired model likes, and has grown earnings at a 31-per-cent pace and sales at a 16-per-cent pace over the long term (using an average of the 3-, 4-, and 5-year EPS/sales growth rates), far ahead of The savings & loan industry averages of 12 per cent and -4 per cent, respectively.

Its growth rate and 25.3 P/E ratio make for a 0.82 PE-to-growth ratio, part of why the Peter Lynch model has strong interest. The company also has a 9-per-cent equity/assets ratio and 1.5-per-cent return on assets rate, beating the 5-per-cent and 1-per-cent targets the Lynch model uses on financials.

BofI has a red hot 91 relative strength over the past 12 months and 33-per-cent profit margins, two reasons why the Motley Fool inspired model has some interest.

The company has the sort of accelerating growth the Martin Zweig-based model likes, with last quarter's earnings growth (31.4 per cent) greater than the average of the three previous quarters (26.1 per cent)

Sales growth also accelerated last quarter to 22.8 per cent, up from 17.3 per cent the previous quarter, which the Zweig model likes.

BofI has averaged a 20.8-per-cent return on retained earnings (those not paid out as dividends) over the past decade, which Buffett model likes.

John Reese owns BOFI.

Click here for a complete breakdown of Validea's investing guru report.

Read other research reports here.

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