8 Most Undervalued Small-Cap Stocks To Buy According To Analysts

6. Webster Financial Corporation (NYSE:WBS)

Forward Price-to-Earnings Ratio: 7.78

Average Upside Potential: 28.15%

Number of Hedge Fund Holders: 42

Webster Financial Corporation (NYSE:WBS) is an American commercial bank that has 177 branches and 316 ATMs. It offers a range of financial products and services, including commercial banking, retail banking, wealth management, and investment banking, and is focused on providing personalized service and tailored solutions to its customers, both individuals and businesses.

Management reported a year-over-year decline of 8.71% in revenue for Q2 2024, amounting to $614.60 million. Despite the decline, a major announcement this quarter was a new joint venture with Marathon Asset Management. The joint venture will enhance the company’s balance sheet flexibility, expand its offerings, and allow it to better serve its clients. The company plans to launch the joint venture in Q4 2024 or Q1 2025.

The company is making several improvements to remain competitive and grow its business, including investing in technology, expanding its product offerings and improving its efficiency. These initiatives are expected to help the company enhance its digital experience, offer new products and services to its customers, reduce costs, and increase profitability.

Webster Financial Corporation (NYSE:WBS) demonstrates a strong financial foundation and a diversified business model. Its balanced loan portfolio and strategic management of its deposit base position it for continued growth and profitability, making it a rather attractive investment opportunity.

Diamond Hill Select Strategy stated the following regarding Webster Financial Corporation (NYSE:WBS) in its first quarter 2024 investor letter:

“Among our bottom Q1 contributors were Humana, Extra Space Storage and Webster Financial Corporation (NYSE:WBS). Self-storage real estate investment trust (REIT) Extra Space Storage and HSA-focused bank Webster Financial performed well at the end of 2023 as investors anticipated interest rate cuts and easier financial conditions in 2024. As this sentiment largely reversed in early 2024 against a resilient economic backdrop and still-elevated interest rates, real estate (and REITs broadly) and banks were pressured in Q1 (though it’s worth noting Webster Financial shares were modestly positive in the quarter). However, we believe Extra Space Storage has a high-quality, long-term franchise with an industry-leading operating platform that should position it well in the future. Similarly, we believe Webster Financial’s large HSA account platform and diverse deposit base is a strong competitive advantage in the current macroeconomic environment.”