Abilene, Texas-based First Financial Bankshares Inc. kept its position as the most valued U.S. bank stock by price-to-estimated 2022 earnings in October, according to an S&P Global Market Intelligence analysis.
S&P Global Market Intelligence analyzed U.S. banks that appear to be valued more as a multiple of earnings than tangible book value. To be included in this analysis, a company needs to have at least four analyst EPS estimates available for calendar year 2022. In addition, the bottom 20% of banks by price-to-tangible book were excluded.
Top banks
First Financial traded at 26.6x its estimated 2022 EPS as of Oct. 14, compared to the industry median of 10.1x for the 111 banks that qualified for this analysis.
In a July 21 note, Keefe Bruyette & Woods analyst Brady Gailey said he does not see First Financial's growth story slowing in the near term due to Texas' strong economy. The analyst assigned a "market perform" rating to First Financial's stock, with a price target of $42.
Louisville, Ky.-based Stock Yards Bancorp Inc. moved up to the No. 2 spot from the No. 3 spot about a month ago with a price-to-estimated 2022 EPS multiple of 20.6x.
Hovde Group analyst Ben Gerlinger said in an Oct. 13 note that although Stock Yards' operational playbook is "exceedingly well-positioned for the volatile economic landscape," he is staying on the sidelines considering the rather "limited" upside from a premium valuation multiple. The analyst rates the company's shares at "market perform," with a $70.22 price target.
After taking the No. 2 spot in September's analysis, La Jolla, Calif.-based Silvergate Capital Corp., whose stock was one of the worst performers among U.S. banks in September, fell out of the top 20. Earlier in October, Wells Fargo analyst Jared Shaw downgraded Silvergate to "underweight" from "overweight" and reduced his price target to $70 from $115, saying the company's growth outlook as a pure-play cryptocurrency banking solution is "significantly limited" in the current environment.
Warsaw, Ind.-based Lakeland Financial Corp. ranked third, trading at 19.2x; Kalispell, Mont.-based Glacier Bancorp Inc. ranked fourth at 18.1x; and San Antonio-based Cullen/Frost Bankers Inc. ranked fifth, trading at 17.9x.
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Deeper into negative territory
Over the past 12 months, First Financial's shares have had a negative 7.3% return, compared to the S&P U.S. BMI Banks index's negative 21.5% return and the S&P 500's negative 18.0% return. Stock Yards' shares posted a positive return of 16.9% and Lakeland Financial's recorded 5.6%.
About half of the 20 most richly valued banks by price-to-estimated 2022 earnings have posted positive returns year-to-date. Tallahassee, Fla.-based Capital City Bank Group Inc. posted the highest positive return at 34.2%. On the other hand, Wilmington, N.C.-based Live Oak Bancshares Inc. posted the biggest negative return at 61.9%.
