TBK Stock Price Forecast: Triumph Bancorp, Inc. is a financial services company operating out of Dallas, Texas, which, through its five subsidiary business brands, offers a range of services including asset-based banking, factoring, payments processing, commercial finance, and insurance.
The Shift to Transportation
Since 2019, Triumph Bancorp has focused its efforts on the transportation and carrier industry, fast becoming a leading lender in the sector.
Its Triumph Business Capital (TBC) wing provides factoring solutions not just for the transportation industry, but also for transportation adjacent operations – including oil and gas companies, distribution, warehousing, and staffing firms.
So far this year, TBC has purchased roughly 1.20 million invoices from 8000 clients, giving it a total volume of around $2.5 billion – an increase of over 70 percent from the equivalent quarter in 2020. The average invoice of just under $2,000 means that this quarter is also the strongest yet for TBC.
In addition to its factoring service, the company also operates TriumphPay (TP) – its billing and settlements platform – which serves as a trusted payment layer used by freight and shipping brokers alike, settling a wide array of carrier accounts for multiple kinds of transportation.
The firm processed over 2.5 million invoices for more than 77,000 carriers in just the first quarter of 2021, totaling around $2.3 billion. Based on March’s figures, TP’s annual fiscal run rate would come to $10.7 billion.
And it appears that the firm’s pivot has paid off.
However, Triumph has further aspirations to be the preeminent player in the transportation payment space; and it’s because of this that the firm has moved to purchase HubTran, a cloud-based, back-office automation software company for the trucking industry.
With the acquisition of HubTran now almost complete, Triumph is well poised to develop a minimal friction, open-loop payments system that can bring together any broker or factoring company, facilitating every facet of the transaction from start to close.
And with the data-handling capabilities that HubTran brings to the table, Triumph hopes to scale the operation as far as it’s able to go. Triumph expects to see TBC used as a platform for the entire factoring industry, not just for its own clients and accounts.
Triumph’s Latest Earnings Report
Triumph’s first quarter operating results for 2021 saw the company smash analyst estimates on both revenue and earnings, with diluted earnings per share of $1.32 beating by $0.41, and revenue of $97.3 million coming in $7.98 million above expectations, up 39 percent on last year’s figures.
Net interest income on the firm’s lending assets was $83.0 million, with a margin on that income of 6.06 percent. The yield on loans was up slightly from the previous quarter at 7.24 percent, and the cost of total loans down quite significantly at 0.28 percent – a drop of 10 basis points from the last quarterly report of 2020.
The total dollar value of loans rose by 1.8 percent in the first quarter to $5.09 billion, and, due to a more favorable macro-economic outlook, the allowance for credit losses dropped 98 basis points as a fraction of the loans held for reinvestment.
Risks Facing Triumph Bancorp
The unpredictability of interest rate volatility has always been a concern for any banking operation, but the economic instability generated from the COVID-19 pandemic has further added to a sense of uncertainty in the lending sector during this time of unprecedented change.
For Triumph specifically, this has meant credit losses to its balance sheet for a number of different reasons, including: increased financial stress on its borrowers who’ve suffered curtailed business activity due to lockdown and other governmental interventions; rising bankruptcies among freight carriers and shipping customers – especially those using TriumphPay’s payment platform; and, a greater incidence of fraud due to a shift to online and remote work practices over the course of the coronavirus crisis.
That said, Triumph has taken measures to insulate itself from the worst effects of any interest rate changes. The company does not use derivative instruments to hedge against loss, holds no trading assets, and is not sensitive to foreign exchange rate fluctuations.
The business also seeks to accumulate deposit transaction accounts – which are often low- or noninterest-bearing – and to offer, where it can, short-duration and/or variable interest loans.
Is Triumph’s Stock Price Forecast to Rise?
The banking sector didn’t have the greatest year in 2020, with many American lenders seeing their share prices fall and business dry up. And after the Federal Reserve cut its Federal Funds Rate to just above zero at the start of the COVID-19 outbreak in March, the outlook couldn’t have seemed more bleak.
But not all banks fared so poorly – and Triumph was one of the lucky ones. The company managed to outperform its 2019 earnings in 2020, and by the impressive start it’s had in this first quarter, it could do the same again.
A key factor that could make or break Triumph’s fiscal year will be the strength of the economic recovery expected in the wake of the pandemic. The signs, however, are looking good.
This year’s first quarter saw improved spot rates in every market, with some of these being particularly high – which is unusual, since January and February typically sport low interest numbers most of the time.
The backlog in shipping tonnage at the start of 2021 meant that the transportation infrastructure was at, and beyond, its total capacity – meaning more business for Triumph, increased cash flows, and greater revenue.
And given that Triumph’s year-on-year revenue growth of 38.6 percent is over 950 percent greater than its average sector rivals, it looks like a sound bet that its good fortunes will continue to prevail.
But don’t be put-off by Triumph’s already solid stock performance over the last twelve months. There’s still plenty of upside in the company, and, if it achieves just a fraction of its vast ambitions, it should continue to rise for a long time yet.
The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.