First Busey (BUSE) recently caught investors’ attention with the appointment of Christopher H.M. Chan as Chief Financial Officer and the declaration of a quarterly cash dividend. Both developments provide insights into the company’s strategic direction and ongoing shareholder priorities.
First Busey’s share price has seen modest movement this year, with momentum picking up after the new CFO appointment and dividend news. Its 1-year total shareholder return remains subdued at -11.1%. Long-term holders, however, have seen a 35% gain over five years, even as near-term price action reflects shifting risk perceptions.
With shares still trading below analyst targets and substantial intrinsic value implied by fundamentals, investors must consider whether First Busey is genuinely undervalued or if the market has already factored in its future growth prospects.
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Price-to-Earnings of 21.1x: Is it justified?
First Busey is currently trading at a price-to-earnings (P/E) ratio of 21.1x, significantly above its industry peers and what many consider reasonable for US banks. At yesterday's close of $23.21, the stock commands a premium multiple in contrast to the sector average.
The price-to-earnings ratio measures how much investors are willing to pay for $1 of the company's earnings. It is an essential indicator of market expectations for future growth. For banks and financial institutions, a higher P/E usually suggests optimism about future profit growth, stability, or a perceived edge over competitors.
However, First Busey's current P/E is nearly double the US Banks industry average of 11.2x and also surpasses the peer group average of 12x. It is also above the estimated "fair" P/E of 18x. This suggests today's valuation leaves little margin for disappointment in earnings trends or risk perception. If markets revert toward the fair ratio, investor sentiment could shift quickly.
However, sustained high valuation is vulnerable if revenue growth slows or if the banking sector sentiment weakens. This could potentially amplify near-term downside risks for First Busey.
While the price-to-earnings ratio paints First Busey as expensive, the SWS DCF model offers a very different picture. Based on future cash flows, the model values shares at nearly double today’s price. This suggests the market might be overlooking significant intrinsic value. Can such a gap really persist for long?
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out First Busey for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 927 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
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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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Operates as the bank holding company for Busey Bank that engages in the provision of retail and commercial banking products and services to individual, corporate, institutional, and governmental customers in the United States.
