- If you are wondering whether Valley National Bancorp at around US$12.19 is offering value or asking too much, it helps to start by looking past the headline share price and into what the market might be pricing in.
- The stock has moved 3.0% over the last week, is down 5.3% over the last 30 days, and shows returns of 4.3% year to date and 41.5% over the last year. Returns of 51.5% over three years and 9.9% over five years give more context to how sentiment has shifted over time.
- Recent trading interest has been shaped by ongoing attention on US regional banks, as investors reassess balance sheet strength, credit risk and the role of smaller banks in a higher rate setting. Valley National Bancorp has been part of that broader conversation, which helps explain why its share price has not moved in a straight line even as the longer term returns have been positive.
- On Simply Wall St's 6 point valuation checklist, Valley National Bancorp scores a 5 out of 6. The rest of this article will break down how different valuation approaches arrive at that view, and will point to a way of going beyond the numbers at the end.
Approach 1: Valley National Bancorp Excess Returns Analysis
The Excess Returns model looks at how much profit a bank can generate over and above the return that shareholders require, then ties that back to the value of its equity per share. Instead of focusing on cash flows, it uses earnings, book value and the cost of equity to estimate what the shares could be worth.
For Valley National Bancorp, the model starts with a Book Value of US$13.39 per share and a Stable EPS of US$1.47 per share, based on weighted future Return on Equity estimates from 8 analysts. The Cost of Equity is US$1.05 per share, which implies an Excess Return of US$0.41 per share. That excess is supported by an Average Return on Equity of 9.82% and a Stable Book Value estimate of US$14.93 per share, sourced from 9 analysts.
Using these inputs, the Excess Returns model arrives at an estimated intrinsic value of US$26.20 per share. Compared with the recent share price of about US$12.19, this implies the stock is 53.5% undervalued on this approach.
Result: UNDERVALUED
Our Excess Returns analysis suggests Valley National Bancorp is undervalued by 53.5%. Track this in your watchlist or portfolio, or discover 61 more high quality undervalued stocks.
Approach 2: Valley National Bancorp Price vs Earnings
For profitable companies like Valley National Bancorp, the P/E ratio is a useful way to connect what you are paying today with the earnings the business is currently generating. It helps you see how much the market is willing to pay for each dollar of earnings.
What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth potential and risk. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth expectations or higher risk usually line up with a lower P/E.
Valley National Bancorp currently trades on a P/E of 11.92x. That sits slightly above the Banks industry average P/E of 11.26x, but below the peer group average of 14.96x. Simply Wall St’s Fair Ratio for Valley National Bancorp is 14.17x, which is a proprietary estimate of the P/E the company might trade on given its earnings profile, industry, profit margins, market cap and key risks.
Because the Fair Ratio builds in these company specific factors, it can give a more tailored view than simple comparisons with industry or peer averages. With the current P/E of 11.92x below the Fair Ratio of 14.17x, the shares appear undervalued on this approach.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Valley National Bancorp Narrative
Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St take your view of Valley National Bancorp, link that story to explicit estimates for future revenue, earnings and margins, turn those into a Fair Value you can compare with the current share price to decide if it looks attractive or stretched, and then keep that view updated automatically as new news or earnings arrive. This is why one investor on the Community page might build a more optimistic Narrative around a US$16 price target supported by expectations for growing core deposits and earnings resilience, while another chooses a more cautious US$13 Narrative that leans on concerns about regional concentration, commercial real estate exposure and competitive pressures.
Do you think there's more to the story for Valley National Bancorp? 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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