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HomeStreet (HMST) Hits Fresh High: Is There Still Room to Run?

HomeStreet (HMST) is at a 52-week high, but can investors hope for more gains in the future? We take a look at the company's fundamentals for clues.

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This story originally appeared on Zacks

Have you been paying attention to shares of HomeStreet (HMST)? Shares have been on the move with the stock up 20.4% over the past month. The stock hit a new 52-week high of $53.83 in the previous session. HomeStreet has gained 57.3% since the start of the year compared to the 23.1% move for the Zacks Finance sector and the 37.1% return for the Zacks Financial - Savings and Loan industry.

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What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 25, 2021, HomeStreet reported EPS of $1.31 versus consensus estimate of $1.12 while it missed the consensus revenue estimate by 1.45%.

For the current fiscal year, HomeStreet is expected to post earnings of $5.3 per share on $341.36 million in revenues. This represents a 52.74% change in EPS on a -4.65% change in revenues. For the next fiscal year, the company is expected to earn $4.6 per share on $322.21 million in revenues. This represents a year-over-year change of -13.28% and -5.61%, respectively.

Valuation Metrics

HomeStreet may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. Investors should consider the style scores a valuable tool that can help you to pick the most appropriate Zacks Rank stocks based on their individual investment style.

HomeStreet has a Value Score of A. The stock's Growth and Momentum Scores are D and B, respectively, giving the company a VGM Score of B.

In terms of its value breakdown, the stock currently trades at 10X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 10.2X versus its peer group's average of 12.9X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, HomeStreet currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if HomeStreet meets the list of requirements. Thus, it seems as though HomeStreet shares could still be poised for more gains ahead.



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