MBT Financial Corp (NASDAQ:MBTF), a US$257.4m small-cap, is a bank operating in an industry, which now face the choice of either being disintermediated or proactively disrupting their own business models to thrive in the future. Many banks and capital markets firms, particularly the large, complex institutions, have been simplifying their business and operating models over the last few years, both for economic reasons and to reduce organizational complexity. Financial services analysts are forecasting for the entire industry, a highly optimistic growth of 40.0% in the upcoming year , and a whopping growth of 58.1% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Is now the right time to pick up some shares in banking companies? Today, I will analyse the industry outlook, as well as evaluate whether MBT Financial is lagging or leading its competitors in the industry.
What’s the catalyst for MBT Financial’s sector growth?
There is a growing awareness that banks cannot excel at every activity, and that it may be easier and cheaper to outsource noncore activities. However, the threat of disintermediation in the payments industry is both real and imminent, taking profits away from traditional incumbent financial institutions. Over the past year, the industry saw growth in the teens, though still underperforming the wider US stock market. MBT Financial lags the pack with its negative growth rate of -10.3% over the past year, which indicates the company has been growing at a slower pace than its banking peers. However, the future seems brighter, as analysts expect an industry-beating growth rate of 51.6% in the upcoming year. This future growth may make MBT Financial a more expensive stock relative to its peers.
Is MBT Financial and the sector relatively cheap?
The banking sector’s PE is currently hovering around 17.84x, in-line with the US stock market PE of 20.6x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. However, the industry returned a lower 8.1% compared to the market’s 10.4%, potentially indicative of past headwinds. On the stock-level, MBT Financial is trading at a PE ratio of 20.31x, which is relatively in-line with the average banking stock. In terms of returns, MBT Financial generated 10.5% in the past year, which is 2.4% over the banking sector.
MBT Financial’s industry-beating future is a positive for shareholders, indicating they’ve backed a fast-growing horse. However, this high growth prospect is most likely factored into the share price, given the stock is trading in-line with its peers. If MBT Financial has been on your watchlist for a while, now may be the time to enter into the stock. If you like its growth prospects, you’ll be paying a fair value for the company. However, if you’re hoping to gain from an undervalued mispricing, this is probably not the best time. However, before you make a decision on the stock, I suggest you look at MBT Financial’s fundamentals in order to build a holistic investment thesis.
- Financial Health: Does it have a healthy balance sheet? Take a look at our free balance sheet analysis with six simple checks on key factors like leverage and risk.
- Historical Track Record: What has MBTF’s performance been like over the past? Go into more detail in the past track record analysis and take a look at the free visual representations of our analysis for more clarity.
- Other High-Growth Alternatives : Are there other high-growth stocks you could be holding instead of MBT Financial? Explore our interactive list of stocks with large growth potential to get an idea of what else is out there you may be missing!
To help readers see past the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price-sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned. For errors that warrant correction please contact the editor at firstname.lastname@example.org.