Credicorp: An Emerging Market Opportunity?

Credicorp (NYSE: BAP) is a unique undervalued financial services name operating in Peru trading at a forward earnings multiple below 11. The company provides services and products in banking, insurance, pension funds and investment banking under five operating subsidiaries. On multiple metrics, it looks like Credicorp is cheap with its current market price trading well below its DCF earnings base multiple, median P/S value and Graham value. Unsurprisingly, the company has an astounding 192% ROIC with ROE over 20%. Revenue growth over the last three years has grown at a CAGR of over 26% with EBITDA growth exceeding 11% over the same timeframe. Book value has grown by nearly 60% while retained earnings have grown by over 40%.

Year-to-date the company is up over 23% and is above both 50 and 200 day moving-averages implying positive movement despite being down 17% over the past year. The company has a great dividend yield of 1.82% with a 5-year growth rate of over 6%. Further, this is not a cheap “cigar-butt” like stock despite trading below many fair value multiples. Over the last 3 months, net interest margins increased by over 4% to over 56% with yearly earnings increasing by over 235%. Despite this positive margin expansion, loan loss provisions have declined which have no doubt improved FCF. With emerging markets in turmoil over the last few months due to uncertainty, Credicorp could provide patient global investors with above average long-term returns.