A Closer Look at First Merchants (FRME) Valuation After Recent Share Price Decline

First Merchants (FRME) has drawn some attention lately, with its stock drifting about 9% lower over the past month. Investors seem to be assessing recent price moves in the context of the bank’s longer-term performance and fundamentals.

See our latest analysis for First Merchants.

Despite the recent 9% dip, First Merchants' latest share price of $37.49 leaves its longer-term performance on solid ground, with a one-year total shareholder return of nearly 9% and a strong five-year total return over 70%. Momentum has eased off lately, as investors appear to be pausing to weigh the bank's steady gains against shifting risk perceptions and future growth potential.

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With shares trading well below analyst targets and strong long-term returns, investors may be wondering if First Merchants is undervalued at current levels, or if the market is already pricing in its future growth prospects.

Most Popular Narrative: 20% Undervalued

With First Merchants trading at $37.49 and a narrative fair value set at $46.83, the current price sits well below the consensus target. This highlights a significant gap between market and narrative expectations heading into the next few years.

Rapid migration and economic growth in core Midwest markets is fueling strong, broad-based loan demand, evidenced by high single-digit loan growth and a robust commercial pipeline. This suggests further revenue acceleration as regional population and business expansion trends persist.

Read the complete narrative.

Want to know the catalyst behind this aggressive target? The engine is projected to be not just headline loan growth, but compound revenue, margin, and bold profit forecasts. Find out which ambitious assumptions are woven into this valuation, and what future growth scenario analysts are really betting on.

Result: Fair Value of $46.83 (UNDERVALUED)

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

However, rising funding costs and regional economic headwinds could dampen First Merchants’ outlook. These factors may challenge the optimistic scenario analysts are pricing in.

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

Build Your Own First Merchants Narrative

If you see things differently or want to follow your own path, you can build out a personal view using the data in just a few minutes. Do it your way

A good starting point is our analysis highlighting 6 key rewards investors are optimistic about regarding First Merchants.

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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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