Is CVB Financial a Value Opportunity After Recent Share Price Volatility?

• If you are wondering whether CVB Financial is quietly turning into a value opportunity or just a value trap, you are not alone. That is exactly what we are going to unpack here.
• The stock closed at $19.78, slipping 2.2% over the last week. It is still up 7.7% over the past month, even as it remains down 5.1% year to date and 10.3% over the last year, which hints at shifting market expectations.
• Recent headlines around regional banks, from changing interest rate expectations to tighter credit standards and ongoing scrutiny of commercial real estate exposure, have put the whole sector under a microscope. CVB Financial has been swept into that narrative, with investors reassessing which regional franchises are positioned to handle a more conservative banking environment and still grow.
• Right now, CVB Financial scores a 3/6 valuation check, which suggests the market might be only partially recognizing its intrinsic value. In the next sections we will break that down using different valuation approaches, before finishing with a more holistic way to think about what the stock is really worth.

Find out why CVB Financial's -10.3% return over the last year is lagging behind its peers.

Approach 1: CVB Financial Excess Returns Analysis

The Excess Returns model estimates what a bank is worth by comparing the return it earns on shareholders' equity to the return investors demand, and then projecting how much value that spread can create over time.

For CVB Financial, the model starts with a Book Value of $16.60 per share and a Stable EPS of $1.60 per share, based on weighted future Return on Equity estimates from 5 analysts. With an Average Return on Equity of 9.02% and a Stable Book Value expected to reach $17.73 per share, the bank is projected to keep generating attractive profits on its equity base.

Against a Cost of Equity of $1.23 per share, the company is estimated to produce an Excess Return of $0.37 per share, meaning it is adding value rather than just covering its cost of capital. When these excess returns are projected forward and discounted, the model arrives at an intrinsic value of about $27.65 per share, suggesting the stock may be trading below this modeled estimate of value compared to the current price.

Result: UNDERVALUED

Our Excess Returns analysis suggests CVB Financial is undervalued by 28.5%. Track this in your watchlist or portfolio, or discover 935 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for CVB Financial.

Approach 2: CVB Financial Price vs Earnings

For a consistently profitable bank like CVB Financial, the Price to Earnings (P E) ratio is a useful way to gauge how much investors are willing to pay for each dollar of current earnings. In general, stronger and more reliable earnings growth, along with lower perceived risk, tend to justify a higher normal or fair P E, while slower growth and higher risk usually warrant a lower multiple.

CVB Financial currently trades on a P E of about 13.3x, which is roughly in line with both its regional banking peers at 13.3x and modestly above the broader Banks industry average of around 11.5x. Simply Wall St also applies a proprietary Fair Ratio framework, estimating what P E the stock should trade on given its specific mix of earnings growth, risk profile, profitability, industry positioning and market cap. In this case, the Fair Ratio for CVB Financial is 11.1x, implying the current market multiple is a bit richer than what the fundamentals alone would suggest. That points to the shares looking slightly expensive on an earnings basis.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1441 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your CVB Financial Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of CVB Financial’s business to clear numbers and a fair value estimate. A Narrative is your story about the company, translated into assumptions about future revenue, earnings and margins, which then flow into a financial forecast and, ultimately, a fair value you can compare to today’s price. On Simply Wall St’s Community page, used by millions of investors, Narratives are an easy, guided tool that helps you decide whether CVB Financial looks like a buy, hold or sell by showing how your Fair Value stacks up against the current share price and automatically updating as new news or earnings arrive. For example, some investors might see CVB Financial as worth closer to $21.00 because they are cautious on California and commercial real estate, while others might lean towards $26.00 if they think wealth management growth, specialty banking strength and efficiency can support higher long term earnings and a richer multiple.

Do you think there's more to the story for CVB Financial? Head over to our Community to see what others are saying!

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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