Evaluating Wintrust Financial (WTFC): Is There Hidden Value After Recent Share Price Gains?

Wintrust Financial (WTFC) has continued to pique investor interest as its stock posts a month return of 4% and is up 7% over the past 3 months. As questions about the bank sector’s momentum persist, it is worth looking at what is behind these numbers.

See our latest analysis for Wintrust Financial.

The share price of Wintrust Financial sits at $130.62, reflecting solid momentum in recent weeks and adding to its reputation for steady growth. While banking stocks have had their ups and downs, Wintrust’s 1-year total shareholder return of 3.2% is modest. The 3-year figure of 51% shows the company’s longer-term strength and the market’s confidence in its growth potential.

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Yet with the stock trading almost 20% below average analyst targets and showing a greater discount to intrinsic value, investors are left to wonder if this is still an overlooked opportunity, or if the market has already factored in all the growth ahead.

Price-to-Earnings of 11.9x: Is it justified?

WTFC trades at a price-to-earnings (P/E) ratio of 11.9x, which stands out compared to its recent share price performance and signals potential value.

The price-to-earnings ratio measures how much investors are paying for each dollar of company earnings. For banks and financial institutions, P/E ratios help investors judge if a stock is valued fairly given its profit-generating ability and outlook.

Currently, WTFC’s P/E is slightly lower than both the peer average (12.6x) and the estimated fair P/E ratio (12.1x). This suggests that the market may be somewhat underpricing Wintrust Financial’s current earnings and future strength, considering its history of stable profits and recent earnings acceleration. These numbers hint at a possible market correction toward a higher valuation level over time.

Compared to the broader industry, WTFC’s multiple is somewhat above the overall US Banks industry average (11.1x), which means it is priced a little higher than most banks but still retains a margin versus what is considered a fair P/E. If the market closes this gap, it could imply more upside for shareholders if fundamentals remain favorable.

Explore the SWS fair ratio for Wintrust Financial

Result: Price-to-Earnings of 11.9x (UNDERVALUED)

However, risks remain, including sector-wide volatility and uncertainty in economic growth. These factors could challenge valuation optimism in the coming months.

Find out about the key risks to this Wintrust Financial narrative.

Another View: Discounted Cash Flow Signals Deeper Value

Another lens to gauge value is the SWS DCF model, which tries to estimate the company's true worth based on projected future cash flows. According to our DCF analysis, WTFC is trading at a significant discount, with shares priced 44% below our fair value estimate. This gap may indicate a potential bargain for those willing to look past short-term volatility.

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 Wintrust Financial 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 876 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 Wintrust Financial Narrative

If you have a different perspective or want to dig into the numbers yourself, you can assemble your own analysis and story in just a few minutes. Do it your way.

A good starting point is our analysis highlighting 5 key rewards investors are optimistic about regarding Wintrust Financial.

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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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