Spring Sale
Canadian Imperial Bank of Commerce (TSX:CM)(NYSE:CM), Canada’s fifth-largest bank, released its fourth-quarter earnings results this morning, and its stock has responded by rising over 2% in early trading. Let’s break down the results and the fundamentals of its stock to determine if we should be long-term buyers today.
Breaking down the quarterly results
Here’s a quick breakdown of 10 of the most notable financial statistics from CIBC’s three-month period ended October 31, 2017, compared with the same period in 2016:
| Metric | Q4 2017 | Q4 2016 | Change |
| Net interest income | $2,464 million | $2,110 million | 16.8% |
| Non-interest income | $1,805 million | $1,571 million | 14.9% |
| Total revenue | $4,269 million | $3,681 million | 16.0% |
| Adjusted net income | $1,164 million | $931 million | 25.0% |
| Adjusted diluted earnings per share (EPS) | $2.81 | $2.60 | 8.1% |
| Total assets | $565,264 million | $501,357 million | 12.7% |
| Deposits | $439,706 million | $395,647 million | 11.1% |
| Loans and acceptances, net of allowance | $365,558 million | $319,781 million | 14.3% |
| Common shareholders’ equity | $29,238 million | $22,472 million | 30.1% |
| Book value per share | $66.55 | $56.59 | 17.6% |
What should you do now?
It was a fantastic quarter overall for CIBC, and it posted phenomenal results for the full year of fiscal 2017, with its revenue up 8.3% to $16.28 billion and its adjusted diluted EPS up 8.7% to $11.11 compared with fiscal 2016. With these strong results in mind, I think the market has responded correctly by sending its stock higher, and I think it still represents a great long-term investment opportunity for two fundamental reasons.
First, it’s still undervalued. CIBC’s stock still trades at just 10.5 times fiscal 2017’s adjusted EPS of $11.11, which is inexpensive compared with its five-year average multiple of 10.8; this multiple is also very inexpensive given its current earnings-growth rate, its estimated 4.1% long-term earnings-growth rate, and the strength and stability of its business model.
Second, it’s a dividend-growth superstar. CIBC pays a quarterly dividend of $1.30 per share, representing $5.20 per share annually, giving it a beautiful 4.4% yield. The company has also raised its annual dividend payment for seven consecutive years, and its 2.4% hike in August has it on track for fiscal 2018 to mark the eighth consecutive year with an increase.
CIBC’s stock is up over 9% since I recommended it following its third-quarter earnings release on August 24, and I think it is still a strong buy today, so take a closer look and strongly consider making it a long-term core holding.
