Preferred Bank (NasdaqGS:PFBC) - Share price, News & Analysis

Q: What is the Fair Price of PFBC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

PFBC ($71.2) is trading below our estimate of [[fair value]] ($238.13)

PFBC fundamental analysis
Snowflake Score
Valuation	5/6
Future Growth	2/6
Past Performance	5/6
Financial Health	6/6
Dividends	2/6

PFBC Stock Overview

Rewards

Trading at 70.1% below our estimate of its fair value

Earnings are forecast to grow 6.23% per year

Earnings grew by 32.4% over the past year

Risk Analysis

Unstable dividend track record

Significant insider selling over the past 3 months

Preferred Bank Competitors

Brookline Bancorp

NasdaqGS:BRKL

US$1.1b

Pathward Financial

NasdaqGS:CASH

US$993.5m

Farmers & Merchants Bank of Long Beach

OTCPK:FMBL

US$980.6m

Lakeland Bancorp

NasdaqGS:LBAI

US$1.0b

Price History & Performance

Summary of all time highs, changes and price drops for Preferred Bank
Historical stock prices
Current Share Price	US$71.20
52 Week High	US$81.97
52 Week Low	US$58.66
Beta	1.16
1 Month Change	3.41%
3 Month Change	5.26%
1 Year Change	18.98%
3 Year Change	40.38%
5 Year Change	33.56%
Change since IPO	49.90%

Recent News & Updates

Jul 21

Here's Why We Think Preferred Bank (NASDAQ:PFBC) Might Deserve Your Attention Today

For beginners, it can seem like a good idea (and an exciting prospect) to buy a company that tells a good story to...

Jul 20

Preferred Bank GAAP EPS of $1.87 beats by $0.08, revenue of $59.02M beats by $1.91M

Preferred Bank press release (NASDAQ:PFBC): Q2 GAAP EPS of $1.87 beats by $0.08. Revenue of $59.02M (+31.1% Y/Y) beats by $1.91M. Linked quarter loan growth (Ex-PPP) of 7.4% Return on beginning equity (“ROBE”) of 18.91% Efficiency ratio of 29.0%

Shareholder Returns

	PFBC	US Banks	US Market
7D	-2.1%	0.3%	1.0%
1Y	19.0%	-14.1%	-12.9%

Return vs Industry: PFBC exceeded the US Banks industry which returned -14.1% over the past year.

Return vs Market: PFBC exceeded the US Market which returned -12.8% over the past year.

Price Volatility

Is PFBC's price volatile compared to industry and market?
PFBC volatility
PFBC Average Weekly Movement	3.5%
Banks Industry Average Movement	3.7%
Market Average Movement	7.9%
10% most volatile stocks in US Market	17.1%
10% least volatile stocks in US Market	3.2%

Stable Share Price: PFBC is less volatile than 75% of US stocks over the past 3 months, typically moving +/- 3% a week.

Volatility Over Time: PFBC's weekly volatility (3%) has been stable over the past year.

About the Company

Founded	Employees	CEO	Website
1991	279	Li Yu	https://www.preferredbank.com

Preferred Bank provides various commercial banking products and services to small and mid-sized businesses and their owners, entrepreneurs, real estate developers and investors, professionals, and high net worth individuals in the United States. The company accepts checking, savings, and money market deposit accounts; fixed-rate and fixed maturity retail, and non-retail certificates of deposit; and individual retirement accounts. It also provides real estate mortgage loans that are secured by retail, industrial, office, special purpose, and residential single and multi-family properties; real estate construction loans; and commercial loans comprising lines of credit for working capital, term loans for capital expenditures, and commercial and stand-by letters of credit; and SBA loans.

Preferred Bank Fundamentals Summary

How do Preferred Bank's earnings and revenue compare to its market cap?
PFBC fundamental statistics
Market Cap	US$1.01b
Earnings (TTM)	US$106.65m
Revenue (TTM)	US$209.49m

9.5x

P/E Ratio

1.7x

P/B Ratio

Is PFBC overvalued?

See Fair Value and valuation analysis

Earnings & Revenue

Key profitability statistics from the latest earnings report
PFBC income statement (TTM)
Revenue	US$209.49m
Cost of Revenue	US$0
Gross Profit	US$209.49m
Other Expenses	US$102.84m
Earnings	US$106.65m

Last Reported Earnings

Jun 30, 2022

Next Earnings Date

n/a

Earnings per share (EPS)	7.53
Gross Margin	100.00%
Net Profit Margin	50.91%
Debt/Equity Ratio	25.0%

How did PFBC perform over the long term?

See historical performance and comparison

Dividends

2.4%

Current Dividend Yield

23%

Payout Ratio

We’ve recently updated our valuation analysis.

Valuation

Is PFBC undervalued compared to its fair value, analyst forecasts and its price relative to the market?

Valuation Score

5/6

Valuation Score 5/6

Price-To-Earnings vs Peers
Price-To-Earnings vs Industry
Price-To-Earnings vs Fair Ratio
Below Fair Value
Significantly Below Fair Value
Analyst Forecast

Key Valuation Metric

Which metric is best to use when looking at relative valuation for PFBC?

Other financial metrics that can be useful for relative valuation.

The above table shows the n/a ratio for PFBC. This is calculated by dividing PFBC's market cap by their current preferred multiple.
What is PFBC's n/a Ratio?
n/a Ratio	0x
n/a	n/a
Market Cap	US$1.01b

PFBC key valuation metrics and ratios. From Price to Earnings, Price to Sales and Price to Book to Price to Earnings Growth Ratio, Enterprise Value and EBITDA.
Key Statistics
Enterprise Value/Revenue	n/a
Enterprise Value/EBITDA	n/a
PEG Ratio	1.5x

Price to Earnings Ratio vs Peers

How does PFBC's PE Ratio compare to its peers?

PFBC PE Ratio vs Peers

The above table shows the PE ratio for PFBC vs its peers. Here we also display the market cap and forecasted growth for additional consideration.
Company	PE	Estimated Growth	Market Cap
Peer Average	11.8x
BRKL Brookline Bancorp	9.8x	19.0%	US$1.1b
CASH Pathward Financial	6.8x	0.1%	US$993.5m
FMBL Farmers & Merchants Bank of Long Beach	8.4x	n/a	US$980.6m
LBAI Lakeland Bancorp	11.5x	16.8%	US$1.0b
PFBC Preferred Bank	9.5x	6.2%	US$1.0b

Price-To-Earnings vs Peers: PFBC is good value based on its Price-To-Earnings Ratio (9.5x) compared to the peer average (11.8x).

Price to Earnings Ratio vs Industry

How does PFBC's PE Ratio compare vs other companies in the US Banks Industry?

Price-To-Earnings vs Industry: PFBC is good value based on its Price-To-Earnings Ratio (9.5x) compared to the US Banks industry average (9.8x)

Price to Earnings Ratio vs Fair Ratio

What is PFBC's PE Ratio compared to its Fair PE Ratio? This is the expected PE Ratio taking into account the company's forecast earnings growth, profit margins and other risk factors.

PFBC PE Ratio vs Fair Ratio.
Fair Ratio
Current PE Ratio	9.5x
Fair PE Ratio	12.4x

Price-To-Earnings vs Fair Ratio: PFBC is good value based on its Price-To-Earnings Ratio (9.5x) compared to the estimated Fair Price-To-Earnings Ratio (12.4x).

Share Price vs Fair Value

What is the Fair Price of PFBC when looking at its future cash flows? For this estimate we use a Discounted Cash Flow model.

Below Fair Value: PFBC ($71.2) is trading below our estimate of fair value ($238.13)

Significantly Below Fair Value: PFBC is trading below fair value by more than 20%.

Analyst Price Targets

What is the analyst 12-month forecast and do we have any statistical confidence in the consensus price target?

Analyst Forecast: Target price is less than 20% higher than the current share price.

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Future Growth

How is Preferred Bank forecast to perform in the next 1 to 3 years based on estimates from 6 analysts?

Future Growth Score

2/6

Future Growth Score 2/6

Earnings vs Savings Rate
Earnings vs Market
High Growth Earnings
Revenue vs Market
High Growth Revenue
Future ROE

6.2%

Forecasted annual earnings growth

Earnings and Revenue Growth Forecasts

Analyst Future Growth Forecasts

Earnings vs Savings Rate: PFBC's forecast earnings growth (6.2% per year) is above the savings rate (1.9%).

Earnings vs Market: PFBC's earnings (6.2% per year) are forecast to grow slower than the US market (12.8% per year).

High Growth Earnings: PFBC's earnings are forecast to grow, but not significantly.

Revenue vs Market: PFBC's revenue (10.7% per year) is forecast to grow faster than the US market (7.9% per year).

High Growth Revenue: PFBC's revenue (10.7% per year) is forecast to grow slower than 20% per year.

Earnings per Share Growth Forecasts

Future Return on Equity

Future ROE: PFBC's Return on Equity is forecast to be low in 3 years time (17.3%).

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Past Performance

How has Preferred Bank performed over the past 5 years?

Past Performance Score

5/6

Past Performance Score 5/6

Quality Earnings
Growing Profit Margin
Earnings Trend
Accelerating Growth
Earnings vs Industry
High ROE

15.0%

Historical annual earnings growth

Earnings and Revenue History

Quality Earnings: PFBC has high quality earnings.

Growing Profit Margin: PFBC's current net profit margins (50.9%) are higher than last year (48.9%).

Past Earnings Growth Analysis

Earnings Trend: PFBC's earnings have grown by 15% per year over the past 5 years.

Accelerating Growth: PFBC's earnings growth over the past year (32.4%) exceeds its 5-year average (15% per year).

Earnings vs Industry: PFBC earnings growth over the past year (32.4%) exceeded the Banks industry 9.2%.

Return on Equity

High ROE: PFBC's Return on Equity (18%) is considered low.

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Financial Health

How is Preferred Bank's financial position? (This company is analysed differently as a bank or financial institution)

Financial Health Score

6/6

Financial Health Score 6/6

Asset Level
Allowance for Bad Loans
Low Risk Liabilities
Loan Level
Low Risk Deposits
Level of Bad Loans

Financial Position Analysis

Debt to Equity History and Analysis

Balance Sheet

Financial Institutions Analysis

Asset Level: PFBC's Assets to Equity ratio (10.5x) is moderate.

Allowance for Bad Loans: PFBC has a sufficient allowance for bad loans (579%).

Low Risk Liabilities: 96% of PFBC's liabilities are made up of primarily low risk sources of funding.

Loan Level: PFBC has an appropriate level of Loans to Assets ratio (78%).

Low Risk Deposits: PFBC's Loans to Deposits ratio (90%) is appropriate.

Level of Bad Loans: PFBC has an appropriate level of bad loans (0.2%).

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Dividend

What is Preferred Bank current dividend yield, its reliability and sustainability?

Dividend Score

2/6

Dividend Score 2/6

Notable Dividend
High Dividend
Stable Dividend
Growing Dividend
Earnings Coverage
Future Dividend Coverage

2.42%

Current Dividend Yield

Dividend Yield vs Market

Notable Dividend: PFBC's dividend (2.42%) is higher than the bottom 25% of dividend payers in the US market (1.52%).

High Dividend: PFBC's dividend (2.42%) is low compared to the top 25% of dividend payers in the US market (4.09%).

Stability and Growth of Payments

Stable Dividend: Whilst dividend payments have been stable, PFBC has been paying a dividend for less than 10 years.

Growing Dividend: PFBC's dividend payments have increased, but the company has only paid a dividend for 8 years.

Current Payout to Shareholders

Earnings Coverage: With its low payout ratio (23.1%), PFBC's dividend payments are well covered by earnings.

Future Payout to Shareholders

Future Dividend Coverage: Insufficient data to determine if a dividend will be paid in 3 years or that it will be covered by earnings.

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Management

How experienced are the management team and are they aligned to shareholders interests?

12.8yrs

Average management tenure

CEO

Li Yu (81 yo)

29.58yrs

Tenure

US$4,557,853

Compensation

Mr. Li Yu founded Preferred Bank and has been its Chairman since December 1991 and has been its Chief Executive Officer since 1993 and served as its President from 1993 to August 22, 2012. He serves as Cor...

CEO Compensation Analysis

Compensation vs Market: Li's total compensation ($USD4.56M) is about average for companies of similar size in the US market ($USD3.94M).

Compensation vs Earnings: Li's compensation has increased by more than 20% in the past year.

Leadership Team

Experienced Management: PFBC's management team is seasoned and experienced (12.8 years average tenure).

Board Members

Experienced Board: PFBC's board of directors are seasoned and experienced ( 18.6 years average tenure).

Ownership

Who are the major shareholders and have insiders been buying or selling?

Insider Trading Volume

Insider Buying: PFBC insiders have only sold shares in the past 3 months.

Recent Insider Transactions

Ownership Breakdown

Dilution of Shares: Shareholders have not been meaningfully diluted in the past year.

Data	Last Updated (UTC time)
Company Analysis	2022/08/06 00:00
End of Day Share Price	2022/08/05 00:00
Earnings	2022/06/30
Annual Earnings	2021/12/31