BofI Holding (NASDAQ: BOFI) is currently priced at $24, but it wasn’t long ago when the stock hovered around the $5 mark until 2012.
The banking company has steadily climbed upward across the past half-decade. Its 52-week high is $35.98, and its 52-week low is $13.47. This is a massive price range for a single year’s time. However, this volatility should not scare you away.
Ask the experts about the company’s prospects, and they typically express optimism. Wall Street analysts’ consensus price target of $31.17 is about $7 more than BofI’s current price.
BofI Holding is an online banking business located in San Diego, California. The company originally incorporated in Delaware back in 1999. Its founders designed a platform for bank deposit accounts and loans that spawned Bank of Internet one year later.
This bank provided online banking services for all of its customers and went public in 2005. Later, the company acquired H&R Block Bank in 2014. The agreement empowered Bofl to act as the banking arm of H&R Block’s financial service offerings, including the company’s credit cards and various lines of credit. Last year, Bofl debuted Individual Retirement Accounts (IRAs) co-branded with H&R Block.
Today, Bofl employs 647 people and operates as the parent company of eight direct banks. Yet Bofl is limited to one brick-and-mortar bank branch. BofI banking products are offered online under an array of different monikers, ranging from BofI Federal Bank (also known as Bank of Internet USA), Virtus Bank, Bank X, Apartment Bank, BofI Advisor, UFB Direct, NetBank, Annuitants Federal Bank and beyond.
Why Bofl is Unique
On the surface, it seems as though BofI is a financial company with the unique twist of offering just about all of its member services online. The company certainly looks good on paper: $8.7 billion in assets, $317 million in yearly revenue and 119 million in net income. Sales growth is over 27 percent. BofI’s stock has a P/E ratio of 11.77. These numbers are overwhelmingly positive.
However, what is most striking about BofI is its innovative business model. Banking is a gigantic industry in which most of the players offer similar services without much diversity in terms of the manner in which those services are offered. The conventional banking model has become static, but BofI is injecting some much-needed dynamism.
BofI issues loans and takes typical banking deposits. However, none of these activities are performed in a conventional in-person manner. Rather, the company’s representatives interact with customers exclusively on the web and over the phone. This is a massive competitive advantage as it significantly reduces overhead costs.
BofI’s overhead costs are so low that the company’s efficiency ratio is considerably better than that of the nation’s top banks. These reduced expenses are passed on to customers through loans with competitively low interest rates – which still leave enough room for a comfortable profit.
Indeed, if you were to inquire about BofI loans like home mortgages, there is a good chance you would learn that doing business with this online bank would save you plenty of money. In fact, many of those who secure home mortgages or refinance mortgages through BofI save thousands of dollars in terms of transaction closing costs.
Is BofI Worth the Investment?
It is clear that BofI has an idiosyncratic way of conducting business. The stock has performed well across the past five years, yet BofI is not yet a power player in the banking sector. The nation’s top banks have trillions in assets. BofI has a mere $8.7 billion.
Look for BofI to continue to grow as people transition toward online banking. People are becoming less interested in human interaction as time progresses. This bodes well for BofI’s online-only banking model. Furthermore, BofI has a head start on the competition. The company is likely to continue making a name for itself that leads to an enhanced rapport, extensive publicity and a steady influx of new customers.
Scoop up BofI’s stock today, hold it for the long haul and there is a good chance it will produce considerable gains in the years and decades ahead.