Is Preferred Bank (USA Stocks:PFBC) low volatility a good sign for investors?

PFBC Stock  USD 69.15  0.15  0.22%   
Preferred Bank is currently generating 0.0207% in daily expected returns and assumes 1.3291% risk (volatility on return distribution) over the 60 days horizon. While many risk-averse investors are getting carried away by overanalyzing banks space, it is reasonable to go over Preferred Bank. We will go over a few points Preferred Bank investors should remember regarding its volatility.
Published over a week ago
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The entity currently holds 147.76 M in liabilities with Debt to Equity (D/E) ratio of 0.16, which may suggest Preferred Bank is not taking enough advantage from borrowing. Debt can assist Preferred Bank until it has trouble settling it off, either with new capital or with free cash flow. So, Preferred Bank's shareholders could walk away with nothing if the company can't fulfill its legal obligations to repay debt. However, a more frequent occurrence is when companies like Preferred Bank sell additional shares at bargain prices, diluting existing shareholders. Debt, in this case, can be an excellent and much better tool for Preferred to invest in growth at high rates of return. When we think about Preferred Bank's use of debt, we should always consider it together with cash and equity.
Volatility is a rate at which the price of Preferred Bank or any other equity instrument increases or decreases for a given set of returns. It is measured by calculating the standard deviation of the annualized returns over a given period of time and shows the range to which the price of Preferred Bank may increase or decrease. In other words, similar to Preferred's beta indicator, it measures the risk of Preferred Bank and helps estimate the fluctuations that may happen in a short period of time. So if prices of Preferred Bank fluctuate rapidly in a short time span, it is termed to have high volatility, and if it swings slowly in a more extended period, it is understood to have low volatility.
Please read more on our technical analysis page.

How important is Preferred Bank's Liquidity

Preferred Bank financial leverage refers to using borrowed capital as a funding source to finance Preferred Bank ongoing operations. It is usually used to expand the firm's asset base and generate returns on borrowed capital. Preferred Bank financial leverage is typically calculated by taking the company's all interest-bearing debt and dividing it by total capital. So the higher the debt-to-capital ratio (i.e., financial leverage), the riskier the company. Please check the breakdown between Preferred Bank's total debt and its cash.

How does Preferred utilize its cash?

To perform a cash flow analysis of Preferred Bank, investors first need to understand how to read the cash flow statement. A cash flow statement shows the amount of cash Preferred Bank is receiving and how much cash it distributes out in a given period. The Preferred Bank cash flow statement breaks down these inflows and outflows into different buckets, including operating activities, investing activities, and financing activities.
Preferred Bank Net Cash Flow from Operations is projected to increase significantly based on the last few years of reporting. The past year's Net Cash Flow from Operations was at 93.39 Million

Preferred Bank Volatility Drivers

Preferred Bank unsystematic risk is unique to Preferred Bank and usually not directly affected by the market or economic environment. An example of unsystematic risk is the possibility of poor earnings or a layoff due to coronavirus. One may mitigate nonsystematic risk by buying different securities in the same industry or by buying in different sectors. For example, if you have a position in Preferred Bank you can also buy Unified Series Trust. You can also mitigate this risk by investing in the financials sector as well as in companies having nothing to do with it. This type of risk is also called diversifiable risk and can be understood from analyzing Preferred Bank important indicators over time. Here we run a correlation analysis between relevant fundamental ratios over at least ten year period to find a relationship in the way they react to changes in Preferred Bank income statement and balance sheet. Here are more details about Preferred volatility.
0.490.420.530.490.610.740.080.660.27-0.040.550.270.520.71-0.010.770.760.770.380.760.49
0.490.970.971.00.940.580.430.470.910.160.970.22-0.440.780.660.420.460.540.920.750.93
0.420.970.940.970.90.520.410.330.920.050.930.07-0.510.740.670.390.410.480.860.70.88
0.530.970.940.970.930.640.40.460.890.250.990.3-0.430.770.680.460.50.570.950.790.97
0.491.00.970.970.940.580.440.480.910.160.970.22-0.440.770.660.420.460.540.920.750.93
0.610.940.90.930.940.770.310.560.830.280.920.39-0.310.920.490.650.70.760.850.910.91
0.740.580.520.640.580.770.190.660.340.20.640.450.140.93-0.050.930.950.970.450.940.61
0.080.430.410.40.440.310.190.380.390.010.44-0.01-0.220.220.34-0.04-0.030.060.430.130.35
0.660.470.330.460.480.560.660.380.280.370.510.610.30.570.10.510.560.640.480.590.53
0.270.910.920.890.910.830.340.390.280.260.870.2-0.620.570.860.180.230.30.910.570.89
-0.040.160.050.250.160.280.20.010.370.260.220.93-0.270.110.360.00.110.140.430.210.45
0.550.970.930.990.970.920.640.440.510.870.220.3-0.380.770.660.450.50.570.950.780.96
0.270.220.070.30.220.390.45-0.010.610.20.930.30.010.320.180.280.390.420.430.420.49
0.52-0.44-0.51-0.43-0.44-0.310.14-0.220.3-0.62-0.27-0.380.01-0.06-0.670.30.260.21-0.51-0.02-0.44
0.710.780.740.770.770.920.930.220.570.570.110.770.32-0.060.130.890.910.940.590.980.72
-0.010.660.670.680.660.49-0.050.340.10.860.360.660.18-0.670.13-0.26-0.2-0.130.820.170.73
0.770.420.390.460.420.650.93-0.040.510.180.00.450.280.30.89-0.260.990.980.220.90.4
0.760.460.410.50.460.70.95-0.030.560.230.110.50.390.260.91-0.20.990.990.290.930.47
0.770.540.480.570.540.760.970.060.640.30.140.570.420.210.94-0.130.980.990.380.950.54
0.380.920.860.950.920.850.450.430.480.910.430.950.43-0.510.590.820.220.290.380.620.97
0.760.750.70.790.750.910.940.130.590.570.210.780.42-0.020.980.170.90.930.950.620.76
0.490.930.880.970.930.910.610.350.530.890.450.960.49-0.440.720.730.40.470.540.970.76
Click cells to compare fundamentals

Breaking down Preferred Bank Further

The current indifference towards the small price fluctuations of Preferred Bank may encourage investors to take a closer look at the company as it is trading at a share price of 70.96 on 42,854 in trading volume. The company directors and management did not add any value to Preferred Bank investors in December. However, most investors can still diversify their portfolios with Preferred Bank to hedge their inherited risk against high-volatility market scenarios. The stock standard deviation of daily returns for 90 days investing horizon is currently 1.33. The below-average Stock volatility is a good sign for longer-term investment options and for buy-and-hold investors.

Our take on Preferred Bank to fall back

Current Information Ratio is up to -0.05. Price may slip again. Preferred Bank has relatively low volatility with skewness of 0.81 and kurtosis of 1.72. However, we advise all investors to independently investigate Preferred Bank to ensure all accessible information is consistent with the expectations about its upside potential and future expected returns. Understanding different market volatility trends often help investors to time the market. Properly using volatility indicators enable traders to measure Preferred Bank's stock risk against market volatility during both bullish and bearish trends. The higher level of volatility that comes with bear markets can directly impact Preferred Bank's stock price while adding stress to investors as they watch their shares' value plummet. This usually forces investors to rebalance their portfolios by buying different stocks as prices fall.

Our Final Perspective on Preferred Bank

When is the right time to buy or sell Preferred Bank? Buying stocks such as Preferred Bank isn't very hard. However, what challenging for most investors is doing it at the right time. Proper market timing is something most people cannot do without sophisticated tools, which help to isolate the right opportunities, deliver winning trades and diversify portfolios on a daily basis.
To conclude, as of the 18th of January 2023, we believe that at this point, Preferred Bank is very steady with below average chance of distress within the next 2 years. From a slightly different point of view, the entity appears to be undervalued. Our primary 90 days recommendation on the company is Strong Buy.

Editorial Staff

This story should be regarded as informational only and should not be considered a solicitation to sell or buy any financial products. Macroaxis does not express any opinion as to the present or future value of any investments referred to in this post. This post may not be reproduced without the consent of Macroaxis LLC. Macroaxis LLC and Rifka Kats do not own shares of Preferred Bank. Please refer to our Terms of Use for any information regarding our disclosure principles.

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