Merchants Bancorp (MBIN): Exploring Valuation After Recent Share Price Rebound

Merchants Bancorp (MBIN) has seen its stock fluctuate over the past month, prompting investors to take a closer look at its business fundamentals and recent performance trends. Returns over the past year have been mixed.

See our latest analysis for Merchants Bancorp.

After a year marked by shifts in market sentiment, Merchants Bancorp’s share price recently bounced 2.64% over the past week and now sits at $32.04. The one-year total shareholder return is still down 26.8%. Despite this, long-term holders have enjoyed a 133.6% total return over five years. This shows that while momentum has cooled lately, the company’s track record rewards patient investors.

If you’re looking beyond banks for companies that have caught insiders’ attention and are growing fast, this could be the perfect chance to discover fast growing stocks with high insider ownership.

With analyst price targets suggesting upside and the stock trading below its estimated intrinsic value, the key question is whether Merchants Bancorp is truly undervalued or if the market is already taking future growth into account.

Price-to-Earnings of 7x: Is it justified?

Merchants Bancorp's latest closing price of $32.04 trades at a price-to-earnings (P/E) ratio of just 7 times, making it appear attractively valued compared to the broader peer group. This valuation looks especially favorable when set against both industry and internal benchmarks.

The price-to-earnings ratio compares a company's current share price to its per-share earnings, serving as a gauge of how much investors are willing to pay for each dollar of earnings. In banking and diversified financials, the P/E ratio is an important yardstick for determining relative value and market confidence in future profit growth.

At 7x, Merchants Bancorp is trading well below the peer average of 18.5x and is significantly beneath its estimated fair P/E ratio of 15.2x. This wide gap suggests the market may be underestimating the bank’s earnings potential or is taking a conservative view on its growth prospects. Long-term investors often watch for these mispricings, with the possibility that the stock could rerate closer to the fair or industry multiple as performance trends stabilize or improve.

Explore the SWS fair ratio for Merchants Bancorp

Result: Price-to-Earnings of 7x (UNDERVALUED)

However, slower revenue growth and lingering market caution could weigh on the stock’s ability to rebound as quickly as some expect.

Find out about the key risks to this Merchants Bancorp narrative.

Another View: Discounted Cash Flow Model

While the price-to-earnings approach shows Merchants Bancorp as undervalued versus its peers and a fair ratio, our SWS DCF model takes the analysis further. It estimates the company’s fair value at a striking $120.57, suggesting the shares might be deeply discounted. Could the market be overlooking something, or is such a wide gap a warning sign?

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 Merchants Bancorp 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 Merchants Bancorp Narrative

If you see things differently or want to dig into the figures yourself, you can shape your own perspective in just a few minutes. Do it your way.

A great starting point for your Merchants Bancorp research is our analysis highlighting 4 key rewards and 2 important warning signs 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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