ConnectOne Might Make May More Manageable

In Monday’s Goldman Guide we alluded to some potential headwinds for this month ahead of the normal summer slowdown.  Yesterday’s sell off seemed to confirm some of our fears with all major U.S. indices down relatively big including our bellwether the Russell 2000, which closed down 1.68%.  Having said that there are still trades to be made out there, and one sector seems to be holding its own in the small cap space, regional banks.

ConnectOne Bancorp, Inc. (NASDAQ – CNOB - $16.94) appears to be another small regional bank on the rise.  The chart below indicates the stock is now trading above its 100-day EMA and has been on a solid accumulation run since a bottom $15.17 in late February.

CNOB 1-Year, 100-Day EMA

(Source: www.otcmarkets.com)

ConnectOne Bancorp, Inc. operates as the bank holding company for ConnectOne Bank that provides various banking products and services.  The Company offers a range of deposit products, including personal and business checking accounts, retirement accounts, money market accounts, time and savings accounts, and NOW accounts.  It also provides personal and commercial business loans on a secured and unsecured basis; revolving lines of credit; commercial mortgage loans; residential mortgages on primary and secondary residences; home equity loans; bridge loans; and other personal purpose loans.  In addition, the Company offers brokerage services, insurance and annuities, mutual funds, and financial planning services.  Further, it provides credit cards, wire transfers, and safe deposit boxes; access to automated teller services; and Internet banking, treasury direct, ACH origination, lockbox, mobile banking, and remote deposit capture banking services.  As of January 27, 2016, the company operated 21 banking offices in the Northeast United States.

First, staying with technical analysis, CNOB has a low short float of 3.7% indicating a lot of believers in the stock.  The Company’s operating margin of 57% is nearly double the industry average of 29%.  Wall Street consensus analysts project a 29% increase in revenue to $132 million for 2016.  The trailing P/E is a low 12.  Additionally, the Company has hit or exceeded EPS for five consecutive quarters.  Finally, back to margins, a profit margin or 36% is a strong indicator of operational and sales success.

The overall market anxiety approaching the summer months aside, the metrics we reviewed along with what appears to be a momentum run make CNOB a solid pick. 

We think the stock climbs back to $20 over the next six months.

Have a great day!

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