Assessing Preferred Bank (PFBC) Valuation as Profitability Pressures Weigh on Net Interest Margin and Earnings

Preferred Bank (PFBC) is back in focus after fresh data showed its net interest margin shrinking by 74 basis points over two years and earnings per share sliding about 5% annually, underscoring mounting profitability pressure.

See our latest analysis for Preferred Bank.

Even with those margin headwinds, investors have largely kept faith, with the share price at $95.22 and an 11.34% year to date share price return alongside a robust 5 year total shareholder return of 150.17%. This suggests momentum is softening, but the long term story remains rewarding.

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Yet with the shares trading below analyst targets and our model implying a steep intrinsic discount, are investors being too pessimistic on earnings pressure? Or is the current price already baking in a return to growth?

Most Popular Narrative Narrative: 11% Undervalued

With Preferred Bank last closing at $95.22 against a narrative fair value of $107, the current price assumes only modest earnings progress and muted re rating.

Analysts expect earnings to reach $126.6 million (and earnings per share of $10.25) by about September 2028, up from $126.5 million today. The analysts are largely in agreement about this estimate.

Read the complete narrative.

Curious how barely rising profits can still support a higher valuation? The narrative leans heavily on steady revenue growth, resilient margins, and a richer future earnings multiple. Want to see how those moving parts fit together?

Result: Fair Value of $107 (UNDERVALUED)

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

However, concentrated California exposure and intensifying funding competition could pressure margins and credit quality, which may challenge the case for a higher valuation.

Find out about the key risks to this Preferred Bank narrative.

Build Your Own Preferred Bank Narrative

If you see the story differently or want to stress test the assumptions yourself, you can craft a fresh view in just a few minutes: Do it your way

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

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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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