In any short-term market turbulence or panic, babies are inevitably thrown out with the bathwater—companies whose stocks are dragged down by association with more-troubled businesses.
March’s banking turmoil is one such episode of investors throwing out the bathwater: The S&P 500 financials sector has lost 13% of its value since mid-February, led by a 28% decline for bank stocks in the index. Financial-software provider Jack Henry & Associates (ticker: JKHY) is the baby.
Investors can be forgiven for their “shoot first, ask questions later” trading. Jack Henry’s customer base includes some 8,000 small banks and other financial institutions—the group at the very center of the recent turbulence. Jack Henry’s shares have declined 15% this year—to their cheapest valuation in years—after returning 18% annually over the prior decade.
Analysts’ consensus price target is now about $175, or some 20% above the stock’s recent $148. Jack Henry has a market value of about $11 billion and minimal debt, and the stock carries an annual dividend yield of 1.4%.