- Wondering if Old National Bancorp at around US$21.48 is offering fair value or a potential mispricing opportunity? This article breaks down what the current share price might really be telling you.
- The stock has seen a 0.3% decline over the past week and a 7.0% decline over the past month, while still sitting on a 4.0% return over the last year and a 65.0% return over three years. This can signal changing views on both growth potential and risk.
- Recent coverage has focused on Old National Bancorp's position within the broader US banks sector and how investors are weighing factors such as interest rate expectations, credit quality, and capital strength. These themes help frame why some shareholders may be reassessing what they are willing to pay for the stock today.
- On a simple checklist of valuation metrics, Old National Bancorp scores 4 out of 6 on perceived undervaluation, as shown in its valuation score. The sections that follow will walk through common valuation approaches and point you to a more complete way to think about value at the end of the article.
Find out why Old National Bancorp's 4.0% return over the last year is lagging behind its peers.
Approach 1: Old National Bancorp Excess Returns Analysis
The Excess Returns model looks at how much profit a company is expected to earn above the return required by its shareholders, then capitalizes those extra profits into an intrinsic value per share.
For Old National Bancorp, the starting point is a Book Value of $21.21 per share and a Stable EPS estimate of $2.84 per share, based on weighted future Return on Equity estimates from 8 analysts. The Average Return on Equity is 11.53%, compared with a Cost of Equity of $1.86 per share. This produces an Excess Return of $0.99 per share.
The model also uses a Stable Book Value of $24.65 per share, drawn from weighted future Book Value estimates from 9 analysts. Together, these inputs are used to estimate how much value Old National Bancorp can create over and above its equity cost and convert that stream into an intrinsic value.
On this basis, the Excess Returns valuation suggests an intrinsic value of about $48.54 per share, implying the stock is 55.8% undervalued relative to a market price around $21.48.
Result: UNDERVALUED
Our Excess Returns analysis suggests Old National Bancorp is undervalued by 55.8%. Track this in your watchlist or portfolio, or discover 62 more high quality undervalued stocks.
Approach 2: Old National Bancorp Price vs Earnings
For a profitable bank like Old National Bancorp, the P/E ratio is a useful way to think about value because it links what you pay per share directly to the earnings that support that share price. Investors usually accept a higher P/E when they expect stronger earnings growth or see lower risk, and a lower P/E when growth looks more modest or risks feel higher.
Old National Bancorp currently trades on a P/E of 12.82x. That sits above the Banks industry average of 11.17x and the peer group average of 11.89x. This may suggest the market is paying a premium compared with many similar names. Simply Wall St’s Fair Ratio for Old National Bancorp is 16.31x, which is the P/E that would be expected given factors such as its earnings profile, industry, profit margins, market cap and company specific risks.
This Fair Ratio is designed to be more tailored than a simple comparison with industry or peer averages because it adjusts for company level characteristics rather than treating all banks as the same. Comparing the Fair Ratio of 16.31x with the current P/E of 12.82x indicates Old National Bancorp trades below this model based estimate of fair value.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Old National Bancorp Narrative
Earlier it was mentioned that there is an even better way to think about valuation, and Narratives are that upgrade. They let you combine your story about Old National Bancorp with your own assumptions for future revenue, earnings and margins, link those to a financial forecast, then to a Fair Value that you can compare with the current price. All of this is done within an easy tool on Simply Wall St’s Community page that updates automatically when new information like news or earnings arrives. For example, one investor might build a more optimistic Old National Bancorp Narrative that lines up with the higher analyst Fair Value of US$30.00, while another might prefer a more cautious view closer to US$23.00. Both can clearly see how their different stories translate into different Fair Values and how that affects their view of whether the current price of around US$21.77 looks attractive based on their own framework.
Do you think there's more to the story for Old 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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