Is CVB Financial (CVBF) Offering Value After Recent Share Price Stability?
- If you are wondering whether CVB Financial's current share price lines up with its underlying value, you are in the right place.
- The stock recently closed at US$19.71, with a 5.6% return over the last 30 days, a 5.6% return year to date, and a 1.4% decline over the past year, plus a 19.3% gain across five years and an 11.5% decline over three years.
- Recent coverage has focused on CVB Financial as a regional bank stock that investors watch closely when interest rate expectations or sentiment toward US financials shift. This backdrop helps explain why shorter term returns differ from the longer term record and sets context for thinking about what investors are currently pricing in.
- On our valuation checklist, CVB Financial scores a 4 out of 6. This means it screens as undervalued on four of six key checks. Next, we look at what different valuation methods say about that number and hint at a more complete way to think about value later in the article.
Find out why CVB Financial's -1.4% return over the last year is lagging behind its peers.
Approach 1: CVB Financial Excess Returns Analysis
The Excess Returns model looks at how much profit a company is expected to generate above the return that shareholders require, and then ties that back to the value of its equity per share.
For CVB Financial, the starting point is a Book Value of $16.93 per share and a Stable EPS estimate of $1.78 per share, based on weighted future Return on Equity estimates from 4 analysts. The implied Cost of Equity is $1.31 per share, which leaves an Excess Return of $0.47 per share. That excess is supported by an Average Return on Equity of 9.46% and a Stable Book Value estimate of $18.76 per share, sourced from weighted future Book Value estimates from 4 analysts.
Feeding these inputs into the Excess Returns model gives an estimated intrinsic value of about $31.48 per share. Compared with the recent share price of $19.71, this framework implies the stock is 37.4% undervalued on these assumptions.
Result: UNDERVALUED
Our Excess Returns analysis suggests CVB Financial is undervalued by 37.4%. Track this in your watchlist or portfolio, or discover 874 more undervalued stocks based on cash flows.
Approach 2: CVB Financial Price vs Earnings
For a profitable bank like CVB Financial, the P/E ratio is a useful shorthand because it links what you pay per share to the earnings that support that share. Investors usually accept a higher or lower P/E depending on what they expect for future earnings growth and how much risk they see in the business.
CVB Financial currently trades on a P/E of 12.77x. That sits above the Banks industry average of 11.84x, but below the peer group average of 18.35x, so the stock is priced between broad sector levels and closer peers.
Simply Wall St’s Fair Ratio for CVB Financial is 15.20x. This is a proprietary estimate of what a “normal” P/E could look like for the company, based on factors such as its earnings profile, industry, profit margins, market cap and company specific risks. Because it adjusts for these fundamentals, the Fair Ratio can be more informative than a simple comparison with industry or peer averages. Setting the current P/E of 12.77x against the Fair Ratio of 15.20x points to the shares trading below that modelled level.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your CVB Financial Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about CVB Financial connected to your own fair value estimate and expectations for its future revenue, earnings and margins.
A Narrative takes what you believe about the bank, links that belief to a financial forecast, then connects that forecast to a fair value that you can compare with the current share price.
On Simply Wall St, millions of investors share these Narratives on the Community page, so you can see different views on CVB Financial, adjust the assumptions to match your thinking and quickly see how that changes the fair value.
Narratives help you decide whether to act by setting Fair Value next to the live Price. They update automatically when new information such as earnings or news is reflected in the underlying estimates.
For example, one CVB Financial Narrative might assume a relatively low fair value with cautious earnings and margin forecasts, while another might set a higher fair value based on more optimistic expectations for the same metrics. This gives you a clear range of perspectives to compare.
Do you think there's more to the story for CVB Financial? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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