We recently compiled a list of the 7 Cheap Bank Stocks To Invest In Before They Take Off. In this article, we are going to take a look at where Dime Community Bancshares, Inc. (NASDAQ:DCOM) stands against the other cheap bank stocks.
Banking Sector Outlook 2025
On December 10 Fidelity Investment released its banking sector outlook for 2025, highlighting tailwinds for the sector which can result in positive momentum for the year. According to Matt Reed, the Fidelity Sector Portfolio Manager, the financial sector experienced significant growth in 2024. The industry is reported to have increased by over 30% as of mid-December, outperforming the broader S&P 500 index by 5 percentage points. As per the analysts, the surge was driven by the post-election boost and improved economic conditions. Reed highlighted that despite the concerns such as the collapse of several small-to-mid-sized banks at the beginning of 2024. The market perceived these issues as isolated rather than a wider crisis, thereby allowing the economic strength to overshadow these challenges quicker than anticipated.
Matt Reeds noted that the financial sector is expected to remain on solid ground in 2025, driven by steady US economic growth. The cyclical nature of financial stocks means their performance is closely linked to the broader economy, which is showing signs of resilience and a potential soft landing. Fidelity Investment identified that larger institutions are expected to potentially recover from past regulatory issues and capitalize on improved market conditions. Moreover, regional banks with strong credit quality and strategic acquisitions are also expected to increase their market shares. Lastly, payment processing companies and financial technology companies are also expected to thrive due to their sensitivity to economic activity and consumer spending patterns.
The report highlighted that while the outlook is optimistic there are some inherent risks including further interest rate cuts, which could compress net interest margins for banks, impacting profitability. In addition, some banks may face challenges related to their commercial real estate holdings if economic conditions worsen, leading to weaker loan demand and increased nonperforming loans.
Our Methodology
To compile the list of 7 cheap bank stocks to invest in before they take off, we used the Finviz stock screener, Seeking Alpha, and Yahoo Finance. Using the screener we aggregated an initial list of bank stocks trading under a Forward P/E of 15 with positive earnings growth and analyst upside potential of at least 25%. Next, we cross-checked the Forward P/E for each stock from Seeking Alpha, earnings growth from Yahoo Finance, and analyst upside potential from CNN. Lastly, we ranked the stocks in ascending order of the analyst upside potential. Please note that the data was collected on January 31, 2025.
Why do we care about what hedge funds do? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
A business loan officer working with a client on a new loan agreement.
Dime Community Bancshares, Inc. (NASDAQ:DCOM)
Earnings Growth: 58.42%
Forward P/E Ratio: 10.99
Analyst Upside Potential: 34.49%
Dime Community Bancshares, Inc. (NASDAQ:DCOM) is a bank holding company that primarily operates through its subsidiary, Dime Community Bank. The bank provides a range of services including deposits, loans, investment services, and retirement accounts. It operates 60 branch locations primarily in Long Island and New York City, making it accessible to a large number of customers in these areas.
Dime Community Bancshares, Inc. (NASDAQ:DCOM) achieved significant growth in 2024 as highlighted during its fiscal fourth quarter 2024 earnings call. The company started the year by hiring deposit-gathering teams from the former Signature Bank, which proved to be successful. These teams helped raise approximately $1.8 billion in core deposits, with about 40% being non-interest-bearing deposits. Moreover, the bank also opened over 11,000 new accounts and established 7,000 individual customer relationships, indicating strong market penetration.
On January 27, M. Navas, an analyst at DA Davidson, kept a Buy rating on the stock. The analyst anticipates savings and loan companies will earn $3.90 per share for the year, up from their prior estimate of $3.00. Dime Community Bancshares, Inc. (NASDAQ:DCOM) is one of the cheap bank stocks to invest in before they take off.
Overall DCOM ranks 3rd on our list of the cheap bank stocks to invest in before they take off. While we acknowledge the potential of DCOM as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DCOM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
