I’ve complained for some time that I thought the premium on Commerce Bancshares' (CBSH) shares was just too high. During this downturn, though, the bank’s more conservative stance is serving the company well and the shares have outperformed the peer group by around 15% or so since the time of my last article. What’s more, while management has faced some unexpected challenges like managing a surge of low-cost deposits, it has handled these challenges quite well so far.
While Commerce has outperformed its peer group, the share price is still lower than when I last wrote, and the fair value hasn’t deteriorated as much. That puts the stock in a better valuation light for me, but it’s still not a “cheap” bank. Investors can fairly argue that quality deserves a premium, and I don’t disagree, but I still believe these shares trade around 10% above my fair value estimate.
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