Axos Financial (AX): Examining Valuation Following Regional Bank Credit Risk Concerns

Recent announcements from Zions Bancorp and Western Alliance Bancorp about worsening loan quality have put the spotlight on regional banks. Axos Financial (AX) found itself swept up in the resulting wave of investor anxiety, even though it has not made direct disclosures of its own.

See our latest analysis for Axos Financial.

Axos Financial has weathered an especially volatile stretch, with its share price recently dropping over 13% for the month as investor worries about regional bank loan quality gripped the sector. Still, momentum over the longer term remains impressive, with a 1-year total shareholder return of nearly 18% and a staggering 119% over three years. This suggests the bigger picture may be brighter than short-term anxieties imply.

If the drama in regional banks has you thinking about where growth and strong insider conviction meet, now's a great time to broaden your search and discover fast growing stocks with high insider ownership

But with Axos shares down sharply from recent highs and trading at a meaningful discount to analyst price targets, should investors see this as a strategic entry point? Or is the market already factoring in the company’s future growth?

Most Popular Narrative: 25.6% Undervalued

Axos Financial’s current share price of $76.50 sits well below the widely followed narrative’s fair value estimate of $102.83. This is sparking debate about what is driving the disconnect and whether the opportunity is real. With the discount rate at 6.78%, the narrative blends consensus analyst forecasts and forward-looking business assumptions into its valuation logic.

The bank's technology investments in artificial intelligence are expected to accelerate product development and drive operating efficiencies. This would allow for improved cost control even as the business scales, potentially leading to enhanced operating leverage and higher earnings growth.

Read the complete narrative.

Want to know what future growth projections power this strong upside? The narrative hints at an aggressive digital banking strategy and a bullish forecast for long-term earnings power. Curious about the financial assumptions behind that sky-high fair value? Dive in to uncover which forward-looking estimates support this rosy outlook.

Result: Fair Value of $102.83 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, risks remain because Axos's heavy reliance on interest income and potential credit headwinds could sharply impact future earnings and investor sentiment.

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

Build Your Own Axos Financial Narrative

If you want a different perspective or prefer hands-on analysis, you can craft your own Axos Financial story in just a few minutes, Do it your way

A great starting point for your Axos Financial research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

Looking for more investment ideas?

The market offers a variety of smart opportunities for investors. Make your next move with confidence by exploring standout stocks tailored to your interests.

• Target steady income by reviewing these 18 dividend stocks with yields > 3% that have shown reliability in different market conditions and offer yields above 3%.
• Take advantage of technological disruption by following these 24 AI penny stocks making headlines in artificial intelligence.
• Explore value opportunities by considering these 875 undervalued stocks based on cash flows trading below their assessed worth based on future cash flows.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com