Scotiabank stock has soared to a record high after earnings: more upside?

Scotiabank stock price continued its strong bull run this week, reaching an all-time high. BNS has jumped 30% this year and 68% over the past 12 months, outpacing the SPDR S&P Bank ETF (KBE), which has risen just 16% this year. This rally may continue in the foreseeable future, as the bank's revenue growth is gaining momentum despite ongoing US-Canada trade tensions.

Scotiabank stock has jumped as revenue growth continues

Bank of Scotiabank is the fourth-largest Canadian bank by assets after Royal Bank of Canada, Toronto-Dominion Bank, and Bank of Montreal. Its financial results showed that its business is doing well, helped by its wealth management business.

The company’s net income jumped to C$2.9 billion in the third quarter from C$2.52 billion in the same period last year. Its profitability also continued rising, with its earnings per share rising to C$2.22. In a statement, Scott Thomson, the CEO, said:

“In particular, we exceeded our 14% return on equity target this quarter, highlighting the improvements that we have made across the bank to increase margins and fee income.”

The biggest driver for the its revenue was the its wealth management segment, which made C$518 million, up by 23% from the same period last year. Its banking and markets segment made $647 million, also 37% higher than what it made last year. 

Bank of Nova Scotia’s Canadian banking and international segments made C$1.07 billion and C$766 million, respectively. These two segments rose by 12% and 8%, respectively. 

The company continues to return funds to its investors, which has helped to boost its earnings-per-share. It repurchased 8.6 million shares in the last quarter, bringing its total repurchases and dividends to C$6.3 billion. It now has a dividend yield of about 3.5%, even as its stock remains at a record high.

A potential catalyst for the stock is that President Donald Trump will likely TACO on his ongoing trade war with Canada. Such a move will reduce the ongoing tensions between the two countries, which are some of the biggest trading partners in the world.

Still, there is a risk that Bank of Nova Scotia is relatively overvalued, with its forward price-to-earnings ratio of 15, higher than its American peers like Goldman Sachs and JPMorgan Chase.

Bank of Nova Scotia stock price analysis

BNS stock chart | Source: TradingView

The daily chart shows that the Scotiabank share price has been in a strong upward trend this year. It rose above the crucial resistance level of $127.58, its highest point in July and August this year. A move above that level invalidated the double-top pattern, which is a common bearish reversal sign.

The stock has remained steady above the 100-day Exponential Moving Average (EMA), while the Relative Strength Index (RSI) moved above the neutral level of 50. Therefore, the stock will likely continue the bullish momentum, potentially to the psychological level of C$150.