This Trio of Regional Banks Looks Fairly Priced

Their share prices are near or below the earnings power value

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Feb 11, 2022
Summary
  • Peoples Bancorp, Horizon Bancorp and Univest Financial are trading near or below their earnings power values.
  • The EPV was popularized by Bruce Greenwald, a former professor at Columbia University and a prominent value investor.
  • It is calculated as the adjusted earnings divided by the weighted average cost of capital.
  • It allows investors to bypass a series of guesswork choices that must be made when evaluating the intrinsic value of a stock through the discounted cash flow model.
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When screening the market for stocks that are trading at or below their fair prices, one tool investors can use is the earnings power value.

The earnings power value was popularized by Bruce Greenwald, a former professor at Columbia University and a well-known value investor. He was looking for ways to bypass the series of guesswork choices that must be made when trying to determine the intrinsic value of a stock through the discounted cash flow valuation model. The metric is calculated as adjusted earnings divided by the weighted average cost of capital.

The following stocks appear to be reasonably valued as their share prices are trading near or below their respective earnings power values.

Peoples Bancorp

The first stock that meets the criteria is Peoples Bancorp Inc. (

PEBO, Financial), a Marietta, Ohio-based regional bank operating 135 locations, of which 119 are full-service bank branches in Ohio, West Virginia, Kentucky, Virginia, Washington D.C. and Maryland.

Peoples Bancorp's earnings power value is $49.55 per share (as of the December 2021 quarter), which is above the share price of $32.05 as of the end of trading on Thursday, for a margin safety of about 35.32%.

Due to a 5.8% rise in the share price over the past year, the market capitalization is $961.3 million. The 52-week range is $27.72 to $36.75.

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GuruFocus has assigned a score of 3 out of 10 to the company's financial strength and 5 out of 10 to its profitability.

BlackRock Inc. and Vanguard Group Inc. are among the largest institutional shareholders of the company with 6.89% and 4.34% of total shares outstanding.

Horizon Bancorp

The second stock that makes the cut is Horizon Bancorp (IN) (

HBNC, Financial), a Michigan City, Indiana-based provider of various commercial and retail banking services through 73 full-service branches in northern and central Indiana and southern and central Michigan.

Horizon Bancorp's earnings power value is $21.95 per share (as of the December 2021 quarter), which is above the share price of $20.59 as of the end of regular trading hours on Thursday, for a margin of safety of 5%.

Following a 20.5% increase in the share price over the past year, the market capitalization is now $907.10 million. The 52-week range is $15.66 to $23.80.

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GuruFocus has assigned a score of 3 out of 10 to the company's financial strength and 5 out of 10 to its profitability.

BlackRock Inc., Vanguard Group and Janus Henderson Group PLC are among the largest shareholders of the company with 7.23%, 5.16% and 4.70% of shares outstanding.

Univest Financial

The third stock that qualifies is Univest Financial Corp. (

UVSP, Financial) is a Souderton, Pennsylvania-based regional bank that operates through 40 bank branches in several counties in Pennsylvania and some counties in New Jersey.

Univest Financial’s earnings power value is $28.93 per share (as of December 2021), which is slightly above the share price of $29.89 as of the end of regular hours on Thursday.

After shares rose 20.73% over the past year, the market capitalization is approximately $881.21 million. The 52-week range is $24.15 to $31.93.

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GuruFocus has assigned a score of 4 out of 10 to the company's financial strength and 6 out of 10 to its profitability.

BlackRock Inc. and FMR LLC are among the largest institutional shareholders of the company with 10% and 6.10% of total shares outstanding.

Disclosures

I/we have no positions in any stocks mentioned, and have no plans to buy any new positions in the stocks mentioned within the next 72 hours. Click for the complete disclosure
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