Westamerica Bancorporation (WABC): Assessing Valuation Following Completion of Major Share Repurchase Program

Westamerica Bancorporation (WABC) has just wrapped up a significant share repurchase program, buying back 6% of its outstanding shares since late February. This latest move highlights management’s stance on the company’s long-term value.

See our latest analysis for Westamerica Bancorporation.

While Westamerica Bancorporation’s buyback has attracted attention, its share price return has been somewhat muted. The stock is down 8.2% year-to-date and the 1-year total shareholder return stands at -5.2%. Momentum has been fading, which suggests that investors remain cautious despite management’s show of confidence.

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With the buyback now behind it and recent returns trailing the broader market, investors must consider whether Westamerica Bancorporation is currently a bargain or if its future growth is already fully reflected in the stock price.

Price-to-Earnings of 9.9x: Is it justified?

Westamerica Bancorporation is trading at a price-to-earnings (P/E) ratio of 9.9x, which is below the industry average and its peer group. With shares recently closing at $47.30, this suggests the market might be undervaluing the company relative to others in the banking sector.

The P/E ratio measures how much investors are willing to pay for each dollar of earnings, which is an important measure for banks since consistent profitability is central to their business model. A lower ratio compared to peers can indicate the market is skeptical about future earnings growth or is simply overlooking a potentially solid value.

Compared to the wider US Banks industry average of 11.3x and a peer average of 17.7x, Westamerica’s P/E looks attractively low. However, it currently trades above its estimated fair P/E ratio of 8.5x, so some caution is warranted if the market moves closer to what is justified by fundamentals.

Explore the SWS fair ratio for Westamerica Bancorporation

Result: Price-to-Earnings of 9.9x (UNDERVALUED)

However, slowing revenue and net income growth may signal deeper fundamental challenges ahead. This could potentially limit the stock’s ability to rebound as expected.

Find out about the key risks to this Westamerica Bancorporation narrative.

Another View: Discounted Cash Flow

Taking a step back from earnings multiples, the SWS DCF model values Westamerica Bancorporation at $117.12 per share, which is far higher than its current price of $47.30. This perspective suggests the stock may be deeply undervalued based on its future cash flows. But which method is closer to reality?

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 Westamerica Bancorporation 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 Westamerica Bancorporation Narrative

If you have a different take on Westamerica Bancorporation’s outlook or want to dig deeper into the numbers, building your own analysis is quick and easy. Just Do it your way.

A great starting point for your Westamerica Bancorporation research is our analysis highlighting 2 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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