Commerce Bancshares Richly Rewarded For Its Quality And Stability

I’ve made the point many times before that valuation doesn’t drive stocks as much as many investors seem to think – stocks don’t go up just because they’re cheap, and likewise don’t go down just because they’re expensive. I didn’t expect the nearly 15% move in Commerce Bancshares (CBSH) since my last update, but then I also didn’t expect the relatively aggressive decision to launch an accelerated share repurchase program, and in this environment, investors really love those upfront capital returns.

My core view on this bank really hasn’t changed, though. It’s an exceptionally well-run bank and an uncommonly conservatively-run bank. Although Commerce won’t suffer as much spread compression as its low-cost deposit base would otherwise suggest, I’m not going to pay more than 18 times next year’s earnings for a bank likely to grow its pre-provision profits at a very low single-digit rate for the next five years.

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Commerce Bancshares Richly Rewarded For Its Quality And Stability