A Look at Cathay General Bancorp's (CATY) Valuation Following the Fed’s Latest Rate Cut

The Federal Reserve made headlines with its latest move, cutting the benchmark interest rate by 25 basis points and signaling that more reductions could be on the way. This announcement grabbed the market’s attention, especially for investors eyeing banks like Cathay General Bancorp (CATY). The prospect of lower borrowing costs brought a wave of optimism to regional banks, as investors wagered that easier monetary policy could spark stronger lending and economic momentum in the months ahead.

In the immediate aftermath, shares of Cathay General Bancorp joined a rally alongside other regional lenders, reacting to the Fed’s dovish stance. This momentum adds to a steady climb for CATY over the past year, with the stock returning 16.8% and showing a modest gain year-to-date. While some recent quarters brought restrained revenue and net interest income growth, the overall trend suggests that Wall Street is watching closely to see whether lower rates can reignite the bank’s earnings power and unlock further upside.

With shares on the rise after the Fed’s decision, the question remains whether Cathay General Bancorp is priced for the future or if there is still value left for investors willing to dig deeper.

Most Popular Narrative: 4.6% Undervalued

According to the most widely followed narrative, Cathay General Bancorp is trading below fair value, with analysts projecting upside potential based on expected earnings and revenue growth in the years ahead.

The continued economic expansion and commercial activity in urban regions where Cathay General operates is driving demand for both commercial and CRE loans. This is reflected in the upward revision of loan growth guidance and is likely to positively impact top-line revenue and net interest income.

Curious what’s fueling this bullish take? The narrative hinges on ambitious earnings and revenue projections, along with a valuation multiple that bucks the industry trend. Want the full story on how these numbers point to a higher fair value? There’s more behind these analyst forecasts than meets the eye.

Result: Fair Value of $51.60 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, persistent commercial real estate weakness or a decline in asset quality could threaten Cathay General's growth outlook and put pressure on future earnings.

Find out about the key risks to this Cathay General Bancorp narrative.

Another View: Discounted Cash Flow Perspective

Looking through the lens of our DCF model offers an alternate way to see Cathay General Bancorp’s value. This approach also points to significant undervaluation, and it reinforces earlier optimism about future returns. But can all models agree on where value truly lies?

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 Cathay General Bancorp 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 Cathay General Bancorp Narrative

If you see things differently or want to dig into the numbers yourself, you can shape your own narrative in just a few minutes. Do it your way

A great starting point for your Cathay General Bancorp research is our analysis highlighting 4 key rewards and 1 important warning sign 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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