A Look at Community Trust Bancorp’s (CTBI) Valuation After Its Recent Earnings Miss

Community Trust Bancorp (CTBI) shares have been responding to the company's latest quarterly earnings report, which came in below analysts' expectations for both earnings per share and revenue. This earnings miss has put investor attention on the bank's short-term performance.

See our latest analysis for Community Trust Bancorp.

Despite a soft earnings report, Community Trust Bancorp’s share price has shown signs of resilience, climbing 9% over the past month and gaining nearly 7.5% year to date. While the company’s 1-year total shareholder return is slightly negative at -1.9%, its three- and five-year total returns of 32% and 91% reflect solid long-term compounding. The latest results have trimmed some momentum, but recent upward moves suggest investors still see growth and value in the bank’s story.

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With CTBI still trading at a discount to analyst price targets, but recent results raising questions about short-term growth, investors must consider whether the stock remains undervalued or if the market is already factoring in its future prospects.

Price-to-Earnings of 10.8x: Is it justified?

Community Trust Bancorp is currently trading at a price-to-earnings (P/E) ratio of 10.8x, which puts it below the peer group average and the broader industry level. However, this is slightly above what regression analysis suggests its fair ratio should be.

The price-to-earnings ratio tells us how much investors are willing to pay today for a dollar of the company’s earnings. Banks with strong, predictable earnings often demand higher multiples, while those with lower or riskier profits trade at a discount. For CTBI, a sustained track record of profit growth and high-quality earnings supports its valuation.

CTBI’s P/E of 10.8x is lower than the peer group’s 13.9x and also comes in below the U.S. banks industry average of 11.4x. Still, the fair value regression model puts a “deserved” level for CTBI at 10.1x, which is slightly below where it currently stands. This suggests the market may be pricing in more optimism than the traditional metrics indicate. Investors hoping for a catch-up to peers need to weigh those growth signals against the model’s fair estimate.

Explore the SWS fair ratio for Community Trust Bancorp

Result: Price-to-Earnings of 10.8x (ABOUT RIGHT)

However, slower revenue and net income growth, along with recent quarterly underperformance, could challenge CTBI’s longer-term story if these trends persist.

Find out about the key risks to this Community Trust Bancorp narrative.

Another View: What Does the SWS DCF Model Show?

Taking a step back from earnings multiples, our DCF model presents a very different picture. It estimates the fair value of Community Trust Bancorp at $111.42, which is almost double its recent share price. This indicates the market could be materially undervaluing the stock. Does this mean investors are overlooking something, or are there risks the model does not account for?

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 Community Trust 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 926 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 Community Trust Bancorp Narrative

If you see things differently or would rather trust your own analysis, you have the tools to craft your own view 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 Community Trust Bancorp.

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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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