If you had to overpay for a bank you could certainly do worse than Commerce Bancshares (CBSH), as this Midwestern lender has a good track record of both internal value creation and relative performance within the banking sector. Still, I’m not in the habit of overpaying for assets unless there’s a very good reason to do so, and these shares have fallen a bit since my last update on the shares, underperforming other regional and community banks by more than 10%.
Even with that period of underperformance, I can’t find a compelling argument to pay up for these shares, and trading at around 18.5x the Street’s FY’23 EPS estimate, investors definitely have to pay up. While there are several fine attributes to Commerce, including strong fee-generating businesses, a very good underwriting track record, and a plan to continuing targeting commercial loan growth markets outside the Midwest, the overall outlook for loan growth isn’t that special and the bank isn’t particularly leveraged to rate hikes.
Read the full article here:
No comments:
Post a Comment