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Wunderlich Cuts Bank Of The Ozarks Stock Because It's Too Expensive

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In a report published Thursday, Wunderlich analyst Kevin Reynolds downgraded the ratings on Bank Of The Ozarks Inc (NASDAQ: OZRK) from Buy to Hold, while raising the price target from $47 to $48.

The company's shares have risen by about 26 percent year-to-date. In fact, over the last eight months, the shares have jumped more than 55 percent, versus a 25 percent increase for the Southern banks in the WSI Universe, an increase of about 14 percent in the S&P 500 and the NASDAQ Bank Index rising around 21 percent over the same period.

While noting that Bank Of The Ozarks's shares should trade at a premium valuation relative to peers, given the company's "consistent high-performance track record and its outlook for above average growth," analyst Kevin Reynolds believes that the current price reflects "a relatively full valuation."

"Approximately 73% of the company's loan portfolio consists of variable rate loans (up from roughly 60% two years ago), while almost 20% of deposits are noninterest bearing. According to OZRK's interest rate sensitivity disclosures in its 10-Q, a +100bps move in rates would boost NII by 1.7% (~$8 million), while a +200bps move would boost NII by 4.0% (~$18 million), yielding incremental EPS of $0.06 (+100bps) and $0.14 (+200bps)," Reynolds wrote.

The market expects the FOMC to raise rates in September 2015 as well as "at every other meeting through year-end 2016." Wunderlich has incorporated "a conservative view of the impact of higher rates" over the next two-year period. With this, the DCF model yields a $48 price target.

Latest Ratings for OZRK

Jun 2016Keefe Bruyette & WoodsMaintainsOutperform
May 2016Keefe Bruyette & WoodsUpgradesMarket PerformOutperform
May 2016Keefe Bruyette & WoodsUpgradesMarket PerformOutperform

View More Analyst Ratings for OZRK
View the Latest Analyst Ratings

Posted-In: WunderlichAnalyst Color Downgrades Price Target Analyst Ratings


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