A Fresh Look at Commerce Bancshares (CBSH) Valuation Following Recent Share Price Weakness

Commerce Bancshares (CBSH) shares have shown a moderate decline over the past month. Investors seem to be weighing recent performance, as the stock is down about 5% in the past month and 11% over the past 3 months.

See our latest analysis for Commerce Bancshares.

Looking at the bigger picture, Commerce Bancshares’ recent share price momentum is still lagging the highs investors saw during last year’s banking strength. This is despite resilient one-year total shareholder return just above flat and robust gains over five years. Short-term price softness suggests sentiment could be shifting as investors weigh new risks versus longer-term value opportunities.

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With Commerce Bancshares currently trading well below analyst price targets and its intrinsic value, the key question emerges: is this dip a buying opportunity, or does the market already factor in the company’s future growth prospects?

Price-to-Earnings of 13.6x: Is it justified?

At a price-to-earnings (P/E) ratio of 13.6x, Commerce Bancshares currently trades at a premium to the US Banks industry average, despite its recent share price weakness around $56.63 per share. This elevated multiple signals that the market may be valuing recent financial performance and quality differently compared to its sector peers.

The P/E ratio measures what investors are willing to pay today for a dollar of current earnings. For banks like CBSH, this ratio provides insight into how the market values earnings stability, growth potential, and business quality relative to other banks.

However, at 13.6x, CBSH’s P/E stands above both the industry average of 11.3x and the peer average of 11.8x. It also exceeds the estimated fair P/E ratio of 12.6x, a level the broader market could correct toward if sentiment shifts. The current premium suggests either continued faith in CBSH’s earnings resilience or that investors are paying extra for perceived quality and stability.

Explore the SWS fair ratio for Commerce Bancshares

Result: Price-to-Earnings of 13.6x (OVERVALUED)

However, ongoing price pressure and modest recent returns could signal that shifting investor sentiment or macroeconomic headwinds may challenge the current valuation.

Find out about the key risks to this Commerce Bancshares narrative.

Another Perspective: Our DCF Model

While Commerce Bancshares looks expensive relative to peers based on its price-to-earnings ratio, our DCF model suggests a very different picture. According to our analysis, CBSH is trading at a substantial 46% discount to its estimated fair value, based on projected future cash flows. Could the market be underestimating the company’s true long-term potential?

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 Commerce Bancshares 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 Commerce Bancshares Narrative

If you see things differently or want to dig deeper, you can analyze the data and shape your own perspective in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding Commerce Bancshares.

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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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