tag:blogger.com,1999:blog-12801945.post3061306587672330613..comments2007-10-18T07:37:32.190-07:00jessefelderhttp://www.blogger.com/profile/05793243991628796940jessefelder@gmail.comBlogger2125tag:blogger.com,1999:blog-12801945.post-215740016787868622007-10-18T07:37:00.000-07:002007-10-18T07:37:00.000-07:00"Right now at about $20 CACB has a price-to-earnings ratio of about 14. Isn't that considered in the 'sustainable' zone?"<BR/><BR/>For a regular company, yes. For a bank, the "sustainable" zone is typically around 10 times. The company can earn roughly $1.20 right now which would project about $12 per share. This agrees with the technical picture discussed in the post.<BR/><BR/>However, I think there's much bigger trouble hiding in the books right now. Default rates will continue to skyrocket (they put a massive amount of money in the hands of spec builders) and, as you suggested, we are currently experiencing a local recession which will continue to have a big impact on deposits. That's a nasty combination.<BR/><BR/>Bottom line, imho, is the stock could easily see the low teens over the next year or so. Book value, with the loan book fully valued, is currently about $9 per share. If the problems I see coming in their loan book materialize, the teens will seem generous.<BR/><BR/>One big caveat for prospective short sellers: the short ratio is an astounding 37! This means it would take over a month of buying to cover all the shorts currently out there. It sends a shiver down my spine to think what that kind of a squeeze would look like...jessefelderhttp://www.blogger.com/profile/05793243991628796940noreply@blogger.comtag:blogger.com,1999:blog-12801945.post-54203087067876414932007-10-17T21:56:00.000-07:002007-10-17T21:56:00.000-07:00<I>Fundamentally, my guess is this would require the bank putting up some ugly numbers.</I><BR/><BR/>I guess we have to ask how much of the growth in stock price was based on anticipation of further growth in the business.<BR/><BR/>Right now at about $20 CACB has a price-to-earnings ratio of about 14. Isn't that considered in the "sustainable" zone? <BR/><BR/>However, we also can't forget about how investors will view the trend lines - year-over-year figures will definitely be bad over at least the next two quarters, and probably quarter-over-quarter as well as the knock-on effects of the RE bust percolate through BOTC's market territory.<BR/><BR/>So if Bank of the Cascades' earnings figures are decidedly flat or trending slightly upwards over the next couple quarters I would expect the stock price to hang around $20/share. But I don't think that's likely. I think that ugly numbers would keep CACB headed for the toilet, but even not-so-ugly numbers that reinforce investors' and analysts' perceptions of a downward trend would also do the trick. <BR/><BR/>Long story short: whether or not we have a national recession is debatable, but a local recession is already underway. That's bad for BOTC. And actually, it'll be even worse for BOTC over the long term if a national recession is avoided, because the national banks will then have an opportunity to consolidate market share in Bend while BOTC is forced to hunker down.Bend Economy Manhttp://www.blogger.com/profile/06444426668314688251noreply@blogger.com