2 Financial Stocks That Could Go Parabolic

Smaller bank stocks like EQB Inc (TSX:EQB) could go parabolic in 2024.

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s premium investing services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

Are you looking for TSX stocks that have a chance of going parabolic?

If so, you might want to take a look at small-cap bank stocks. Yes, I’m serious: I said small-cap bank stocks. Such stocks have a real shot at delivering exponential returns in the year ahead. The reason is that there is such a cloud of fear hanging over their shares following the U.S. banking crisis that the probability of big moves on good news is very high.

This year, smaller Canadian banks have been rallying as their Big Six cousins stagnate. The reason for their stock price performance is their superior earnings performance. Many smaller Canadian financials are growing by high double digits. When you add to that the fact that most of them pay high dividends, the decision to invest seems like a no-brainer. Nevertheless, there are real risks with these stocks that you have to watch out for. In this article, I will explore two little-known TSX financials that have the potential to go parabolic in 2024.

EQB

EQB (TSX:EQB) is a Canadian online bank that offers very high-yield Guaranteed Investment Certificates (GICs). Unlike other banks, this company’s stock does not have a very high dividend yield (only 1.7%). But what it lacks in yield, it makes up for in growth. In its most recent quarter, EQB delivered the following:

  • $395 million in revenue, up 80%
  • $141 million in net income, up 208%
  • $3.54 in diluted earnings per share (EPS), up 208%
  • $70.33 in book value per share, up 12%
  • 9% customer growth
  • One-basis-point improvement in net interest margin
Created with Highcharts 11.4.3EQB PriceZoom1M3M6MYTD1Y5Y10YALLwww.fool.ca

These were pretty incredible results. And the company expects them to continue! When it announced its fourth-quarter and full-year results, EQB also upped its guidance, saying that it expects another year of solid growth in 2024.

EQB’s long-term averages are just as good as its most recent quarterly results. Over the last five years, it has compounded at the following rates:

  • Revenue: 22%
  • Net interest income: 24%
  • Net income: 18%
  • Common equity: 17%

Those rates are just terrific. And the company thinks it can keep the good times rolling.

First National

First National Financial (TSX:FN) is another TSX lender that did a lot of growth in 2023 — and this one has a high (5.9%) dividend yield to boot.

First National isn’t a bank in that it doesn’t take deposits. It does, however, issue mortgages — and it’s collecting rising interest on them. In its most recent quarter, FN delivered the following:

  • $226 million in revenue, up 26%
  • $83.6 million in earnings, up 108%
  • A 37% profit margin
  • $114 million in operating income, up 108%

Those are all pretty strong results. And the conditions that made them possible look set to continue in 2024. Although interest rates are expected to come down somewhat this year, they will still be relatively high by the standards of the last 10 years. So, FN will have lots of opportunities to collect growing interest income.

Although First National’s long-term track record hasn’t been as good as EQB’s, it has done well more recently. And the macroeconomic picture should facilitate more good years to come.

Should you invest $1,000 in Fortis right now?

Before you buy stock in Fortis, consider this:

The Motley Fool Stock Advisor Canada analyst team just identified what they believe are the Top Stocks for 2025 and Beyond for investors to buy now… and Fortis wasn’t one of them. The Top Stocks that made the cut could potentially produce monster returns in the coming years.

Consider MercadoLibre, which we first recommended on January 8, 2014 ... if you invested $1,000 in the “eBay of Latin America” at the time of our recommendation, you’d have $20,697.16!*

Stock Advisor Canada provides investors with an easy-to-follow blueprint for success, including guidance on building a portfolio, regular updates from analysts, and two new stock picks each month – one from Canada and one from the U.S. The Stock Advisor Canada service has outperformed the return of S&P/TSX Composite Index by 29 percentage points since 2013*.

See the Top Stocks * Returns as of 3/20/25

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Andrew Button has no position in any of the stocks mentioned. The Motley Fool recommends EQB. The Motley Fool has a disclosure policy.

Confidently Navigate Market Volatility: Claim Your Free Report!

Feeling uneasy about the ups and downs of the stock market lately? You’re not alone. At The Motley Fool Canada, we get it — and we’re here to help. We’ve crafted an essential guide designed to help you through these uncertain times: "5-Step Checklist: How to Prepare Your Portfolio for Volatility."

Don't miss out on this opportunity for peace of mind. Just click below to learn how to receive your complimentary report today!

Get Our Free Report Today

More on Dividend Stocks

A worker gives a business presentation.
Dividend Stocks

Market Dip: Opportunity or Risk This April?

This market dip might have investors worried, but should they be excited instead?

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Why I’d Add This Top TSX Dividend Stock to My TFSA During the Current Dip

The market is full of volatility right now. Fortunately, this top TSX dividend trades at a discount and pays a…

Read more »

Pile of Canadian dollar bills in various denominations
Dividend Stocks

Invest $20,000 in 2 TSX Stocks for $1,421.09 in Passive Income

Are you looking to bump up your passive income? Then consider these two TSX stocks.

Read more »

A plant grows from coins.
Dividend Stocks

Where I’d Invest in Canadian Value Stocks for Long-Term Compounding

When markets plunge, Warren Buffett's wisdom shines: Get greedy when others are fearful. Canadian value stocks like Scotiabank await patient…

Read more »

analyze data
Dividend Stocks

How I’d Invest $28,000 in Canadian Natural Resource Stock to Amass Personal Wealth

Investing in TSX dividend stocks such as Enbridge can help you earn a passive-income stream in 2025.

Read more »

hand stacks coins
Dividend Stocks

Got $400? How I’d Start Building Income With 3 High-Yield Stocks for the Long Term

These high-yield dividend stocks have a solid payout history, making them compelling investments to generate passive income.

Read more »

A close up color image of a small green plant sprouting out of a pile of Canadian dollar coins "loonies."
Dividend Stocks

I’d Put $15,000 in These 3 Dividend-Growth Champions for Increasing Income Potential

Want to offset some volatility? Here are three defensive dividend-growth champions that can generate a juicy yield right now.

Read more »

Blocks conceptualizing Canada's Tax Free Savings Account
Dividend Stocks

Transform Your TFSA Into a Cash-Creating Machine With $7,000

Discover how the Tax-Free Savings Account can be your golden goose for generating cash without losing your investment.

Read more »