Is Northwest Bancshares (NWBI) Pricing Reflect Long Term Value After Recent Share Rebound

• If you are wondering whether Northwest Bancshares is attractively priced or not, you are in the right place for a clear look at what the current share price might be implying.
• The stock most recently closed at US$13.01, with a 7.7% return over the last 30 days, a 7.2% return over the past year and a 29.9% return across five years, although the last 7 days show a 3.2% decline.
• Recent coverage has focused on how regional banks are positioning themselves in a higher rate setting and how deposit trends and loan growth are affecting investor confidence in the sector. This context has been part of the backdrop for moves in Northwest Bancshares' share price, even outside of specific company announcements.
• On our framework, Northwest Bancshares screens as undervalued in 2 of 6 checks. This gives it a valuation score of 2 out of 6. Next, we will look at how different valuation methods line up here before finishing with a way to assess value that goes beyond the usual ratios.

Northwest Bancshares scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Northwest Bancshares Excess Returns Analysis

The Excess Returns model looks at how much value a bank creates over and above the return that equity investors require. Instead of focusing on cash flows, it centres on what the company earns on its equity base compared with its estimated cost of equity.

For Northwest Bancshares, the model uses a Book Value of US$12.94 per share and a Stable EPS of US$1.39 per share, based on weighted future Return on Equity estimates from 5 analysts. The Average Return on Equity used is 10.01%, while the Cost of Equity is US$0.97 per share. That gap feeds into an Excess Return of US$0.42 per share, suggesting value is being created above the required return. The Stable Book Value input is US$13.86 per share, again sourced from analyst estimates.

Combining these inputs, the Excess Returns valuation arrives at an estimated intrinsic value of US$25.63 per share. Compared with the recent share price of US$13.01, this implies the stock is 49.2% undervalued based on this model.

Result: UNDERVALUED

Our Excess Returns analysis suggests Northwest Bancshares is undervalued by 49.2%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Northwest Bancshares.

Approach 2: Northwest Bancshares Price vs Earnings

For a profitable bank like Northwest Bancshares, the P/E ratio is a useful shorthand for how much investors are paying for each dollar of earnings. It ties the share price directly to the company’s current earnings, which tend to be a key driver of value for established, income generating businesses.

What counts as a “normal” P/E depends on what investors expect from the company and how risky they think it is. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth prospects or higher risk usually line up with a lower multiple.

Northwest Bancshares currently trades on a P/E of 15.08x. That is above the Banks industry average of 11.83x and is also higher than the peer group average of 14.45x. Simply Wall St’s Fair Ratio for the stock is 14.60x, which is its estimate of an appropriate P/E once you factor in earnings growth, profit margins, industry, market cap and specific risks. Because the Fair Ratio is built around the company’s own fundamentals, it can be more tailored than a simple comparison with peers or the broader industry. With the actual P/E only slightly above the Fair Ratio, the shares appear to be about fairly valued on this metric.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your Northwest Bancshares Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you write your own story for Northwest Bancshares. You can link your assumptions about future revenue, earnings, margins and fair value to a clear financial forecast, then compare that Fair Value to today’s price and see it update automatically when new information like news or earnings is released. One investor might build a more optimistic Narrative around successful Penns Woods integration, suburban expansion and a Fair Value above the current analyst consensus of US$13.38, while another might focus on slower growth regions, higher branch costs and credit risk to arrive at a Fair Value below that level.

Do you think there's more to the story for Northwest Bancshares? 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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