- This article examines whether Live Oak Bancshares, at around US$33.55, still offers value or if the best days are already priced in by walking through what the numbers are actually saying.
- The stock has experienced mixed performance, with a 7.5% decline over the past week and a 19.5% decline over the past month. Over 1 year it shows a 16.3% return and over 3 years an 18.8% return, while the 5-year return sits at a 44.3% decline and year to date it is down 3.3%.
- These moves sit against a backdrop of ongoing coverage of US regional banks and their balance sheet strength, funding costs, and lending conditions. All of these factors continue to influence how investors think about risk and value in the sector. For Live Oak Bancshares, this broader conversation around regional lenders has helped shape sentiment, even when there is no single headline driving the latest price action.
- On our checklist of six valuation tests, Live Oak Bancshares scores 4 out of 6, as shown in our valuation score. Next we will look at how common tools like P/E, P/B, and cash flow models compare, before finishing with a more holistic way to think about what the stock may be worth.
Find out why Live Oak Bancshares's 16.3% return over the last year is lagging behind its peers.
Approach 1: Live Oak Bancshares Excess Returns Analysis
The Excess Returns model asks a simple question: are shareholders expected to earn more than the basic cost of equity capital over time, and if so, how much is that stream of extra value worth per share today?
For Live Oak Bancshares, the model starts with an estimated Book Value of $25.06 per share and a Stable EPS of $3.64 per share, based on weighted future Return on Equity estimates from 4 analysts. Against this, the Cost of Equity is set at $2.09 per share, which implies an Excess Return of $1.55 per share. In other words, the company is modeled to earn more than its equity cost, supported by an average Return on Equity of 12.16%.
Using a Stable Book Value of $29.92 per share, sourced from weighted future Book Value estimates from 3 analysts, these excess returns are capitalized to arrive at an intrinsic value of about $73.34 per share. Compared with the recent share price of around $33.55, this framework implies the stock is 54.3% undervalued.
Result: UNDERVALUED
Our Excess Returns analysis suggests Live Oak Bancshares is undervalued by 54.3%. Track this in your watchlist or portfolio, or discover 50 more high quality undervalued stocks.
Approach 2: Live Oak Bancshares Price vs Earnings
For a profitable bank like Live Oak Bancshares, the P/E ratio is a useful shortcut because it links what you pay today directly to the earnings the business is already generating. It gives you a quick sense of how many dollars of price you are paying for each dollar of profit.
What counts as a “normal” P/E depends on two things that investors care about the most: how confident they are in future earnings growth and how much risk they see in those earnings. Higher expected growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually lines up with a lower P/E.
Live Oak Bancshares currently trades on a P/E of 15.1x, compared with a Banks industry average of around 11.3x and a peer average of 11.5x. Simply Wall St’s Fair Ratio for the company is 16.8x. This Fair Ratio is a proprietary metric that aims to be more tailored than a simple peer or industry comparison because it blends factors like earnings growth, profit margins, risk profile, industry and company size. Set against that Fair Ratio, the current P/E suggests the shares are trading below what this framework would consider a fair level.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 20 top founder-led companies.
Upgrade Your Decision Making: Choose your Live Oak Bancshares Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce Narratives, a simple tool on Simply Wall St’s Community page where you connect your view of a company’s story with a set of assumptions for future revenue, earnings and margins. This then flows through into a fair value you can compare with the current share price to help decide whether the stock looks expensive or cheap. For Live Oak Bancshares you might, for example, lean toward a higher fair value of US$51 if you agree with more optimistic expectations around growth and profitability, or closer to US$40 if you are more cautious. Each Narrative automatically updates as fresh news, filings or earnings are added so your story and valuation stay aligned without extra work.
Do you think there's more to the story for Live Oak 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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