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Once upon a time there was a wrestling tag team called Demolition. They were comprised of two guys, one guy was Ax, the other was Smash. They used to win most of the time, but clearly they were a rip off of The Road Warriors.
Why is this relevant? It isn’t. But since we’re buying stocks here, we might as well buy one that kicks ass just as well as Demolition did. So today I bought stock in Axos Financial (AX) at 57.58. I will sell it in 4 – 6 weeks at 66.51. Here’s why I like AX:
Of course, it always starts with the chart:
That’s right…another bank stock. This stock is up 40% in the last 12 months and yet its PE is only 8.3. It is an incredible value. This ain’t no baby bank either, with a market cap of $3.5 billion. With a Return on Equity of over 21%, this stock is pumping out the earnings faster than Ax and Smash scored pinfalls and submissions.
Las Vegas-based Axos Financial serves as a holding company for Axos Bank, a provider of consumer and business banking. I used to like going to Vegas to bet on college football, now I just do it on my phone. Axos Financial also owns Axos Clearing and Axos Invest, which provide securities clearance services for broker dealers and registered investment advisors. Axos ranks No. 1 out of 52 stocks in the Investors Business Daily finance savings and loan industry group. On April 30, Axos reported fiscal third-quarter earnings for the period ended March 31. The company showed sales growth of 27% to $294.8 million, while earnings jumped 44% to $1.94 per share. Net income increased 38.7% to $110.7 million. The company has shown sales and earnings have been on a steady growth path over the past eight quarters. Sales growth has ranged between 18% and 55% while earnings growth has been between 15% and 44%. This is really remarkable for a company with a PE of 8.
For the nine months ended March 31, 2024, net income was $345.1 million, an increase of 57.0% from net income of $219.8 million for the nine months ended March 31, 2023. Diluted earnings per share were $5.88 for the nine months ended March 31, 2024, an increase of $2.25, or 62.0%, as compared to diluted earnings per share of $3.63 for the nine months ended March 31, 2023.
Other Highlights
Axos Bank empowers consumers and businesses to easily manage their financial lives. Through a blend of human insight and digital expertise, they help their customers plan, bank, borrow, and invest in a way that’s both convenient and customized.
More than two decades ago, Axos reinvented the banking model. By launching as a digital bank on July 4, 2000, they signaled independence from brick-and-mortar banking. Since then, they've grown to over $20.3 billion in assets. By offering competitive interest rates, low to no fees, and convenient access, they've freed customers from the constraints of traditional banking so they can focus on the important things in life. Ax and Smash.
This company was originally know as Bank of the Internet (BOFI) and yes, BOFI was a $$$MR. MARKET$$$ stock pick winner back in August of 2013. They became Axos Bank on October 1, 2018 and began trading on the New York Stock Exchange under the ticker symbol “AX”.
The first banks were probably the religious temples of the ancient world, and were probably established sometime during the third millennium B.C. Banks probably predated the invention of money. Deposits initially consisted of grain and later other goods including cattle, agricultural implements, and eventually precious metals such as gold, in the form of easy-to-carry compressed plates. Temples and palaces were the safest places to store gold as they were constantly attended and well built. As sacred places, temples presented an extra deterrent to would-be thieves. There are extant records of loans from the 18th century BC in Babylon that were made by temple priests/monks to merchants. By the time of Hammurabi's Code, banking was well enough developed to justify the promulgation of laws governing banking operations.
We’ve come a long way baby. You don’t need bricks and mortar to be a bank. Twenty years ago, a customer had a handful of neighborhood banks to choose from to store his deposits. Today, that customer can choose a neighborhood bank, or can choose an online account from either an online bank like Everbank or Axos or from an online account offering from a large multiservice bank. As consumers become more accustomed to making financial transactions over the internet, online accounts will continue to gain increasing market share. Just set up shop online. Take deposits online and make loans online. Voila, you are a bank!
Axos gets around much of the hardware of modern banking by essentially outsourcing. If a customer takes out a home loan from Axos, the bank hires an appraiser to look at the house and a notary from a title company close to where the customer lives to finish the paperwork. Don’t make a face. You probably work for a company that outsourced its people. You know when you call the 800 number and someone named “Buster” picks up the phone and tries to use American slang but has a peculiar accent? That’s right. You just called the Philippines. But never mind all that. Since 2000, AX has embodied financial strength, excellence in customer service, and innovation in banking. They will continue to anticipate customer needs, provide new technologies, and expand products and services to help stay ahead of the challenges of modern life.
Axos Bank’s encryption, antivirus and malware protection, two-step authentication, biometrics, and live account monitoring ensure critical customer data stays protected no matter where users encounter the bank. The result is a banking experience that remains lean and results-focused more than 20 years after Axos helped pioneer banking over the internet.
The bank does have a significant real estate portfolio which may be some concern because of the work from home trend. However, their real estate portfolio is spread across the country with underlying assets being located in California, New York, Florida, New Jersey, Arizona, Washington D.C., Texas, Georgia, and Illinois, among others. So the punchline is diversification across regions mitigates their risk.
Now, management is particularly driven to provide shareholder value by setting quantifiable goals for the business: maintaining an ROE ratio of 17% or better, achieving an annual interest-earning assets growth of 12% or more, and maintaining an annualized efficiency ratio of 40% or lower at the bank level. Deposits at the bank experienced double-digit growth almost every year in the last 10+ years. Their loan portfolio yield has increased to over 8%. Only about 1% of their total loans were rated as Substandard. 95% of AX loans are asset-backed, which lowers their overall loan risk.
Finally, when you consider the rate at which the company's earnings per share has grown over a substantial period, there is absolutely no reason to think that this is going to change any time soon. Even a tiny expansion over the existing PE multiple will drive up this stock price past 75. Remember, AX doesn’t pay a dividend, so any earnings they have get plowed back into the share price.
There is no better proof that a company is on the right path than receiving recognition from its customers. Axos has been recognized multiple times for its excellent service, and in 2022, it was awarded honors such as "Bank Honor Roll 2022", "1st Place - Top 10 Digital Banks for 2022", and "Best Online Banks 2022". In fact, Axos has been among the top online banks for four years in a row and remains a top contender in 2023.
Axos knew what to do when the Silicon Valley Bank catastrophe unfolded. Overall it was great to see that they took the right steps, they did a great job to get the word out that they were still insured — they were on top of it. The problem at Silicon Valley Bank is that the majority of accounts were uninsured. These Axos guys are good. Real good. Ax and Smash.
Here’s a true customer review: “When I called due to an issue with getting my business account, a lady named Neiva helped me out greatly. She found that there was an error keeping me from the next steps and resolved it. Her help ensured I will be doing business with Axos for the long-term!”
Let’s face it. Axos is a money machine because the bank is run like a well oiled machine. The proof in the pudding is its impressive earnings growth. The stock price simply has not caught up to this company’s earnings potential. They don’t have any landscaping costs because they do not have any bricks and mortar facilities. It’s all done in the cloud….amazing!
Here’s what the boss had to say:
“We delivered strong earnings per share and book value per share growth, driven by a 14% sequential increase in net interest income and a 5% sequential increase in non-interest income, ex-last quarter’s one-time gain on the FDIC Loan Purchase,” stated Greg Garrabrants, President and Chief Executive Officer of Axos. “We generated double-digit deposit growth year-over-year and linked-quarter annualized as a result of our diversified channels across consumer and commercial banking. Despite continued cash sorting declines in our custody business, average non-interest bearing deposit balances increased 2.6% linked quarter, driven by a 7% sequential increase in the number of non-interest bearing deposit accounts.”
“Our asset-based lending at low loan-to-values credit philosophy continues to serve us well, with non-performing assets remaining relatively stable,” stated Derrick Walsh, Executive Vice President and Chief Financial Officer of Axos. “We continue to generate excess capital due to our strong returns and net interest margin, with a return on average common stockholders’ equity of 20.71% and a return on average assets of 1.98% in the three months ended March 31, 2024. Our strong capital position allows us to balance organic growth and opportunistic asset, business and talent acquisition with common share repurchases.”
I’ll be taking a big swing with AX and can’t wait to chop down another HUGE winner!
$$$MR. MARKET$$$
www.mrmarketishuge.com
Why is this relevant? It isn’t. But since we’re buying stocks here, we might as well buy one that kicks ass just as well as Demolition did. So today I bought stock in Axos Financial (AX) at 57.58. I will sell it in 4 – 6 weeks at 66.51. Here’s why I like AX:
Of course, it always starts with the chart:
That’s right…another bank stock. This stock is up 40% in the last 12 months and yet its PE is only 8.3. It is an incredible value. This ain’t no baby bank either, with a market cap of $3.5 billion. With a Return on Equity of over 21%, this stock is pumping out the earnings faster than Ax and Smash scored pinfalls and submissions.
Las Vegas-based Axos Financial serves as a holding company for Axos Bank, a provider of consumer and business banking. I used to like going to Vegas to bet on college football, now I just do it on my phone. Axos Financial also owns Axos Clearing and Axos Invest, which provide securities clearance services for broker dealers and registered investment advisors. Axos ranks No. 1 out of 52 stocks in the Investors Business Daily finance savings and loan industry group. On April 30, Axos reported fiscal third-quarter earnings for the period ended March 31. The company showed sales growth of 27% to $294.8 million, while earnings jumped 44% to $1.94 per share. Net income increased 38.7% to $110.7 million. The company has shown sales and earnings have been on a steady growth path over the past eight quarters. Sales growth has ranged between 18% and 55% while earnings growth has been between 15% and 44%. This is really remarkable for a company with a PE of 8.
For the nine months ended March 31, 2024, net income was $345.1 million, an increase of 57.0% from net income of $219.8 million for the nine months ended March 31, 2023. Diluted earnings per share were $5.88 for the nine months ended March 31, 2024, an increase of $2.25, or 62.0%, as compared to diluted earnings per share of $3.63 for the nine months ended March 31, 2023.
Other Highlights
- Net interest margin was 4.87% for the quarter ended March 31, 2024 compared to 4.42% for the quarter ended March 31, 2023
- Net loans for investment totaled $18.7 billion at March 31, 2024, an increase of $0.5 billion, or 10.3% annualized, from $18.3 billion at December 31, 2023
- Total deposits were $19.1 billion at March 31, 2024, an increase of $2.0 billion, or 15.4% annualized, from $17.1 billion at June 30, 2023; total savings, checking and other demand deposits were $18.1 billion at March 31, 2024, up from $14.9 billion at March 31, 2023
- Approximately 90% of total deposits were FDIC-insured or collateralized at March 31, 2024
- Total capital to risk-weighted assets was 13.49% for Axos Bank at March 31, 2024, up from 12.50% at June 30, 2023
- Book value increased to $38.48 per share, from $31.07 at March 31, 2023, an increase of 23.8%
Axos Bank empowers consumers and businesses to easily manage their financial lives. Through a blend of human insight and digital expertise, they help their customers plan, bank, borrow, and invest in a way that’s both convenient and customized.
More than two decades ago, Axos reinvented the banking model. By launching as a digital bank on July 4, 2000, they signaled independence from brick-and-mortar banking. Since then, they've grown to over $20.3 billion in assets. By offering competitive interest rates, low to no fees, and convenient access, they've freed customers from the constraints of traditional banking so they can focus on the important things in life. Ax and Smash.
This company was originally know as Bank of the Internet (BOFI) and yes, BOFI was a $$$MR. MARKET$$$ stock pick winner back in August of 2013. They became Axos Bank on October 1, 2018 and began trading on the New York Stock Exchange under the ticker symbol “AX”.
The first banks were probably the religious temples of the ancient world, and were probably established sometime during the third millennium B.C. Banks probably predated the invention of money. Deposits initially consisted of grain and later other goods including cattle, agricultural implements, and eventually precious metals such as gold, in the form of easy-to-carry compressed plates. Temples and palaces were the safest places to store gold as they were constantly attended and well built. As sacred places, temples presented an extra deterrent to would-be thieves. There are extant records of loans from the 18th century BC in Babylon that were made by temple priests/monks to merchants. By the time of Hammurabi's Code, banking was well enough developed to justify the promulgation of laws governing banking operations.
We’ve come a long way baby. You don’t need bricks and mortar to be a bank. Twenty years ago, a customer had a handful of neighborhood banks to choose from to store his deposits. Today, that customer can choose a neighborhood bank, or can choose an online account from either an online bank like Everbank or Axos or from an online account offering from a large multiservice bank. As consumers become more accustomed to making financial transactions over the internet, online accounts will continue to gain increasing market share. Just set up shop online. Take deposits online and make loans online. Voila, you are a bank!
Axos gets around much of the hardware of modern banking by essentially outsourcing. If a customer takes out a home loan from Axos, the bank hires an appraiser to look at the house and a notary from a title company close to where the customer lives to finish the paperwork. Don’t make a face. You probably work for a company that outsourced its people. You know when you call the 800 number and someone named “Buster” picks up the phone and tries to use American slang but has a peculiar accent? That’s right. You just called the Philippines. But never mind all that. Since 2000, AX has embodied financial strength, excellence in customer service, and innovation in banking. They will continue to anticipate customer needs, provide new technologies, and expand products and services to help stay ahead of the challenges of modern life.
Axos Bank’s encryption, antivirus and malware protection, two-step authentication, biometrics, and live account monitoring ensure critical customer data stays protected no matter where users encounter the bank. The result is a banking experience that remains lean and results-focused more than 20 years after Axos helped pioneer banking over the internet.
The bank does have a significant real estate portfolio which may be some concern because of the work from home trend. However, their real estate portfolio is spread across the country with underlying assets being located in California, New York, Florida, New Jersey, Arizona, Washington D.C., Texas, Georgia, and Illinois, among others. So the punchline is diversification across regions mitigates their risk.
Now, management is particularly driven to provide shareholder value by setting quantifiable goals for the business: maintaining an ROE ratio of 17% or better, achieving an annual interest-earning assets growth of 12% or more, and maintaining an annualized efficiency ratio of 40% or lower at the bank level. Deposits at the bank experienced double-digit growth almost every year in the last 10+ years. Their loan portfolio yield has increased to over 8%. Only about 1% of their total loans were rated as Substandard. 95% of AX loans are asset-backed, which lowers their overall loan risk.
Finally, when you consider the rate at which the company's earnings per share has grown over a substantial period, there is absolutely no reason to think that this is going to change any time soon. Even a tiny expansion over the existing PE multiple will drive up this stock price past 75. Remember, AX doesn’t pay a dividend, so any earnings they have get plowed back into the share price.
There is no better proof that a company is on the right path than receiving recognition from its customers. Axos has been recognized multiple times for its excellent service, and in 2022, it was awarded honors such as "Bank Honor Roll 2022", "1st Place - Top 10 Digital Banks for 2022", and "Best Online Banks 2022". In fact, Axos has been among the top online banks for four years in a row and remains a top contender in 2023.
Axos knew what to do when the Silicon Valley Bank catastrophe unfolded. Overall it was great to see that they took the right steps, they did a great job to get the word out that they were still insured — they were on top of it. The problem at Silicon Valley Bank is that the majority of accounts were uninsured. These Axos guys are good. Real good. Ax and Smash.
Here’s a true customer review: “When I called due to an issue with getting my business account, a lady named Neiva helped me out greatly. She found that there was an error keeping me from the next steps and resolved it. Her help ensured I will be doing business with Axos for the long-term!”
Let’s face it. Axos is a money machine because the bank is run like a well oiled machine. The proof in the pudding is its impressive earnings growth. The stock price simply has not caught up to this company’s earnings potential. They don’t have any landscaping costs because they do not have any bricks and mortar facilities. It’s all done in the cloud….amazing!
Here’s what the boss had to say:
“We delivered strong earnings per share and book value per share growth, driven by a 14% sequential increase in net interest income and a 5% sequential increase in non-interest income, ex-last quarter’s one-time gain on the FDIC Loan Purchase,” stated Greg Garrabrants, President and Chief Executive Officer of Axos. “We generated double-digit deposit growth year-over-year and linked-quarter annualized as a result of our diversified channels across consumer and commercial banking. Despite continued cash sorting declines in our custody business, average non-interest bearing deposit balances increased 2.6% linked quarter, driven by a 7% sequential increase in the number of non-interest bearing deposit accounts.”
“Our asset-based lending at low loan-to-values credit philosophy continues to serve us well, with non-performing assets remaining relatively stable,” stated Derrick Walsh, Executive Vice President and Chief Financial Officer of Axos. “We continue to generate excess capital due to our strong returns and net interest margin, with a return on average common stockholders’ equity of 20.71% and a return on average assets of 1.98% in the three months ended March 31, 2024. Our strong capital position allows us to balance organic growth and opportunistic asset, business and talent acquisition with common share repurchases.”
I’ll be taking a big swing with AX and can’t wait to chop down another HUGE winner!
$$$MR. MARKET$$$
www.mrmarketishuge.com
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