Lakeland Financial (LKFN): Evaluating Valuation After Q3 Earnings Growth and Analyst Upgrade

Lakeland Financial (LKFN) just released its third quarter results, highlighting year-over-year gains in net interest income and net income. The stock was also upgraded to Outperform, which could potentially boost investor confidence around these updates.

See our latest analysis for Lakeland Financial.

After a tough stretch this year, Lakeland Financial’s share price recently found some steady footing, closing at $57.89. Despite stronger earnings, the stock’s year-to-date price return is still down 13.97% and its total shareholder return over the past year sits at -20.78%. While the earnings beat and the recent analyst upgrade may be turning sentiment, three- and five-year total shareholder returns of -16.71% and 19.85% respectively suggest the long-term story has been mixed. Right now, momentum is starting to rebuild, but investors are still weighing both improved fundamentals and ongoing risks.

If you’re watching Lakeland Financial for signals of a turnaround, it could be the perfect time to broaden your search and discover fast growing stocks with high insider ownership

But with the stock still trading below its analyst price target and showing a sizable intrinsic discount, the big question is whether Lakeland Financial is now undervalued or if the market has already adjusted for future growth expectations.

Price-to-Earnings of 15.1x: Is it justified?

At a closing price of $57.89, Lakeland Financial trades at a price-to-earnings (P/E) ratio of 15.1x, which is significantly higher than both its industry and peer averages. This suggests the market is asking investors to pay more per dollar of earnings compared to other banks.

The P/E ratio is a key measure for banks, as it shows how much investors are willing to pay today for the company’s expected future profits. For Lakeland Financial, this higher multiple could indicate optimism about its earnings outlook or simply mean it is priced at a premium in relation to the current sector environment.

However, Lakeland Financial’s P/E ratio stands out as expensive when stacked against the US Banks industry average of 11.1x and the peer average of 12.1x. When compared to an estimated fair P/E of 10.5x, the premium is even more pronounced. Such a gap implies the share price may be outpaced by sector peers if earnings do not accelerate.

Explore the SWS fair ratio for Lakeland Financial

Result: Price-to-Earnings of 15.1x (OVERVALUED)

However, persistent underperformance relative to peers and ongoing price volatility remain key risks that could limit any sustained upward momentum in Lakeland Financial’s shares.

Find out about the key risks to this Lakeland Financial narrative.

Another View: Discounted Cash Flow Says Undervalued

While the price-to-earnings ratio paints a picture of Lakeland Financial as expensive, our SWS DCF model suggests otherwise. Based on projected cash flows, the model estimates a fair value of $90.48, which is 36% above the current share price. Can the gap between sentiment and value persist much longer?

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 Lakeland Financial 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 876 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 Lakeland Financial Narrative

If you have a different perspective or want to dig deeper into the numbers, you can easily build your own view in minutes. Do it your way

A great starting point for your Lakeland Financial research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

Smart investors never settle for just one opportunity. Give yourself an edge by tapping into fresh stock ideas and strategies perfectly tailored to today’s market.

• Capitalize on the explosive potential of artificial intelligence by reviewing these 25 AI penny stocks, which are reshaping industries with automation, data analytics, and next-level innovation.
• Strengthen your portfolio with reliable income by checking out these 16 dividend stocks with yields > 3%, which provides solid yields above 3% and is ideal for steady cash flow and peace of mind.
• Seize opportunities in value by hunting for bargain-priced stocks and scanning these 876 undervalued stocks based on cash flows, which shows strong fundamentals but market-beating upside.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com