Signature Bank Has Its Challenges, But The Valuation Is More Interesting

While Signature Bank (NASDAQ:SBNY) went along with the banking sector in its post-election run, the prior underperformance up to that point means that the trailing twelve-month appreciation in the stock is only about 10% - well below the performance of many bank stocks. As is often the case when former high-flyers start underperforming and/or trading at reasonable (or at least more reasonable) multiples, it's definitely worth asking if there's opportunity.

In the case of Signature, I'm cautiously optimistic. I believe the company can maintain a mid-teens earnings growth rate, and that supports a fair value a little bit above today's price. I'd also note that the company's combination of growth and returns on capital suggests that it's undervalued on a TBV basis. While weak trends in the taxi medallion portfolio and possibly slower multi-family lending should be watched and the shares aren't a clear-cut bargain, the stock could have some relative appeal compared to other banks (many of which are quite richly valued now).

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Signature Bank Has Its Challenges, But The Valuation Is More Interesting