Is First Busey (BUSE) Shares Fairly Valued? A Fresh Look at the Bank’s Growth Prospects

First Busey (BUSE) shares have shown some movement lately, catching the attention of investors considering the bank’s performance over the month and past 3 months. The latest data offers a good chance to re-evaluate its value position.

See our latest analysis for First Busey.

Looking at the bigger picture, First Busey's share price has remained fairly steady for most of the year, while the 1-year total shareholder return now sits slightly in the red. This suggests that momentum has stalled for now; however, with recent industry shifts and ongoing changes in risk perception, investors are watching for signs of renewed growth potential.

If stable share price action has you curious about other opportunities, take the next step and discover fast growing stocks with high insider ownership.

With shares trailing analyst targets and financials showing robust growth, the real question now is whether First Busey is trading below its true worth or if the market has already factored in the company’s future prospects.

Price-to-Earnings of 26.7x: Is it justified?

First Busey is currently trading at a price-to-earnings ratio of 26.7x, significantly above both the industry and peer averages. Despite the recent share price performance, this steep multiple suggests the market is pricing in strong growth or unique advantages that set the company apart from other banks.

The price-to-earnings ratio (P/E) compares a company's current share price to its per-share earnings. It helps investors evaluate how much they are paying for a dollar of earnings, and in the banking sector, it is a common gauge of whether a stock appears undervalued or overvalued relative to its peers and the broader market.

This premium valuation raises questions about whether First Busey’s growth prospects or financials justify paying such a high multiple. While current forecasts point to robust revenue and earnings expansion, the company faces clear challenges. Recent earnings and profit margin trends are moving in the opposite direction. Even when compared to its estimated fair P/E ratio of 28.3x, the share price remains near that theoretical benchmark, implying not much room for error if growth slows.

Compared to the US Banks industry average P/E of 11.7x and peer average of 15.2x, shareholders are paying a considerable premium for First Busey. The proximity to the fair P/E ratio indicates the stock could be fairly valued if forecasts are met, but any misses could quickly shift this narrative.

Explore the SWS fair ratio for First Busey

Result: Price-to-Earnings of 26.7x (OVERVALUED)

However, sustained share price weakness and the risk of softer earnings could quickly challenge the optimistic outlook that investors have priced into First Busey shares.

Find out about the key risks to this First Busey narrative.

Another View: Discounted Cash Flow Valuation

While multiples suggest First Busey looks expensive, the SWS DCF model offers a strikingly different perspective. According to this approach, shares are trading nearly 49% below their fair value estimate, which could indicate a wide margin of safety. Could the market be missing something?

Look into how the SWS DCF model arrives at its fair value.

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 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.

Build Your Own First Busey Narrative

If these conclusions do not match your view or you prefer to dig into the data on your own terms, you can quickly build your own perspective in just a few minutes. Do it your way.

A great starting point for your First Busey research is our analysis highlighting 3 key rewards and 3 important warning signs that could impact your investment decision.

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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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