TFS Financial Corp. – Value Analysis (NASDAQ:TFSL) : August 7, 2017

Capitalcube gives TFS Financial Corp. a score of 50.

Our analysis is based on comparing TFS Financial Corp. with the following peers – Flagstar Bancorp, Inc., United Community Financial Corp., Central Federal Corporation, Wayne Savings Bancshares, Inc., First Defiance Financial Corp. and Citizens Community Bancorp, Inc. (FBC-US, UCFC-US, CFBK-US, WAYN-US, FDEF-US and CZWI-US).

Fundamental Overview

TFS Financial Corp. has a fundamental score of 50 and has a relative valuation of OVERVALUED.

Fundamental Score

Company Overview

  • It currently trades at a Price/Book ratio of (2.66).
  • The market expects TFSL-US to grow faster than its peers and for the company to improve its current ROE.
  • TFSL-US‘s relatively high profit margins are burdened by capital inefficiency.
  • Changes in annual earnings (relative to peers) are better than the change in its revenues (relative to peers), implying the company is focused more on earnings.
  • TFSL-US‘s return on equity has improved from below median to about median among its peers over the last five years.
  • While TFSL-US‘s revenues have increased slower than peer median, the market currently gives the company a higher than peer median P/E ratio and may be factoring in some sort of a strategic play.
  • The company’s equity capital investment program suggests it is under-investing in a business that is producing peer median returns.

Drivers of Margin

  • TFSL-US‘s pre-tax margin suggests relatively low operating costs.
  • The company’s net interest income (net interest income/total revenues) of 93.00% is around peer median suggesting that TFSL-US‘s lending operations does not benefit from any differentiating pricing advantage. However, TFSL-US‘s pre-tax margin is more than the peer median (44.71% compared to 25.25%) suggesting relatively low operating costs.
  • The company’s comparatively low proportion of fee based income (i.e. non interest income/total revenues) of 7.00% versus peer median of 17.03% — suggests that TFSL-US‘s operating margins are likely to be more volatile. In addition, TFSL-US‘s proportion of overhead costs (i.e. non interest expense/total revenues) of 59.67x is around peer median — suggesting no cost advantage on fee-based overhead operations.
Drivers of Margins

Quadrant label definitions. Hover to know more

Differentiated; Low Cost, Differentiated; High Cost, Commodity; High Cost, Commodity; Low Cost

Company Profile

TFS Financial Corp. is a bank holding company, which through its subsidiary, Third Federal Savings and Loan, engages in the provision of retail consumer banking. It offers mortgage lending, deposit gathering, and other insignificant financial services. The company was founded in 1997 and is headquartered in Cleveland, OH.