1st Source (SRCE): Margin Expansion Reinforces Bullish Value Narrative

1st Source (SRCE) posted earnings growth of 15.5% this past year, continuing a five-year average climb of 8.8% annually. Net profit margins also improved to 36.5% from last year’s 34.8%. Forecasts are pointing to more measured gains ahead, with earnings and revenue growth rates projected at 2.2% and 4.7% per year, respectively. With strong value signals, attractive dividends, and consistent historic profitability, investors may view these results as support for the stock’s current undervalued profile.

See our full analysis for 1st Source.

Now, let’s see how these results stack up against the prevailing community and market narratives. Sometimes those stories converge; other times they get a shake-up.

Curious how numbers become stories that shape markets? Explore Community Narratives

Peer Valuation Gap Widens

• SRCE trades at a price-to-earnings ratio of 10.1x, which is well below its peer average of 13.7x and the US banks industry average of 11.2x.
• Bulls highlight how the current price of $61.02, which is significantly below the DCF fair value estimate of $130.68, reinforces the argument that the market may be overlooking steady profit streams and dividend strength.
  • Persistent margin improvements and a below-market valuation increase the appeal for value-focused investors who are waiting for a re-rate.
  • No major risks were cited, giving bulls additional confidence that the stock’s discount is not tied to hidden troubles.

Margin Expansion Bolsters Case

• Net profit margins rose from 34.8% to 36.5% in the last year, building on an established record of quality earnings.
• The prevailing narrative acknowledges margin strength as a key buffer. Although growth is forecast to cool versus the wider market, SRCE’s ability to steadily expand profitability complicates the bear case.
  • Even as revenue growth is expected to slow to 4.7% annually, the margin uptick signals management discipline and operational resilience.
  • Sector-wide skepticism remains, but SRCE’s improved margins stand out at a time when many regional lenders are struggling to defend profitability.

Growth Slows Against Market Pace

• Forecast earnings growth for SRCE is 2.2% per year, trailing the broader US market’s anticipated trajectory.
• In market commentary, this tempered outlook is seen as reinforcing a “wait-and-see” approach, with attention shifting from rapid expansion to the sustainability of moderate gains.
  • Stable high-quality earnings offset some disappointment about growth deceleration, as the company’s five-year track record of 8.8% annual growth sets a strong baseline.
  • Investors considering sector rotation may respect SRCE’s dependability but look for sharper catalysts before making bold moves.

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on 1st Source's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

SRCE’s slower projected earnings and revenue growth raise questions about its ability to keep pace with faster growing stocks in today’s market.

If you want to back companies expected to deliver robust expansion ahead, use our high growth potential stocks screener (59 results) and discover opportunities primed for strong, sustained growth.

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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