TriCo Bancshares (TCBK): Assessing Valuation After Bank Stock Rally on Fed Signals and Upbeat Earnings

TriCo Bancshares (TCBK) shares caught a lift as bank stocks rallied on upbeat third-quarter earnings from major players in the sector. Investors also responded positively to signals that the Federal Reserve could soon pause its quantitative tightening program, which helped fuel broader market confidence.

See our latest analysis for TriCo Bancshares.

TriCo Bancshares has followed sector momentum, with a recent 1-day share price pullback of 5.1% despite the broader rally in banks after upbeat earnings and hints at a more supportive stance from the Fed. Even so, the stock’s five-year total shareholder return stands at an impressive 55%, while performance over the past year has cooled. This suggests that momentum is currently catching its breath rather than accelerating.

If the shifts in bank stocks have you rethinking your approach, now might be the perfect time to broaden your outlook and discover fast growing stocks with high insider ownership

With TriCo shares trading nearly 19% below analyst targets and fundamentals showing steady growth, is the market overlooking a potential value play? Or is all future upside already reflected in today’s price?

Price-to-Earnings of 11.8x: Is it justified?

TriCo Bancshares currently trades at a price-to-earnings (P/E) ratio of 11.8x, slightly above the US Banks industry average of 11.6x. This indicates a modest premium despite recent share price weakness.

The price-to-earnings ratio helps investors gauge how much the market is paying for each dollar of earnings. It is a central metric for valuing banks, which are closely watched for stable earnings power and reliable dividends.

While TriCo’s P/E signals a valuation higher than the industry median, the market may be expecting slightly steadier earnings or less volatility from the bank. However, this premium is marginal and does not reflect a significant growth assumption or outsized quality rating relative to larger peers. Compared to our estimated fair P/E ratio of 11.5x, the current multiple is also slightly above what would appear justified based on broader market data, suggesting little headroom for further multiple expansion.

Explore the SWS fair ratio for TriCo Bancshares

Result: Price-to-Earnings of 11.8x (ABOUT RIGHT)

However, a slowdown in revenue or weaker net income growth could challenge the current valuation and reduce optimism for a swift recovery.

Find out about the key risks to this TriCo Bancshares narrative.

Another View: What Does Our DCF Model Say?

Taking a different approach, the SWS DCF model values TriCo Bancshares at $66.14 per share. Its current price stands nearly 38% below our estimate of fair value. While multiples suggest the valuation is about right, the DCF method hints that the market might be missing potential upside. Could the real opportunity lie beneath surface-level ratios?

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 TriCo Bancshares 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 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 TriCo Bancshares Narrative

If you see things differently or want to dive deeper into the numbers, you can easily craft your own analysis and perspective in under three minutes. Do it your way

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding TriCo Bancshares.

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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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