Is Pinnacle Financial Partners (PNFP) Pricing Reflect Its Banking Sector

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• If you are wondering whether Pinnacle Financial Partners’ current share price really lines up with its underlying worth, you are not alone.

• The stock last closed at US$95.09, with a 2% decline over the past week and flat returns over the last month and year, while the 3 year and 5 year returns of 19.7% and 36.6% hint at a mixed journey for longer term holders.

• Recent news coverage around Pinnacle Financial Partners has centered on its positioning within the US regional banking space and how investors are thinking about bank stocks in general. These headlines help explain why sentiment around the share price has shifted at different points over the past few years.

• Pinnacle Financial Partners currently records a valuation score of 4/6, which means it screens as undervalued on most of the checks we use. Next, we will compare several common valuation approaches, then finish with a way of looking at valuation that can give you a deeper feel for whether the stock really fits your portfolio.

Find out why Pinnacle Financial Partners’s -23.0% return over the last year is lagging behind its peers.

The Excess Returns model looks at how much profit a company can earn above the return that shareholders require, then capitalizes those “excess” profits into an intrinsic value per share.

For Pinnacle Financial Partners, the starting point is its Book Value of US$88.65 per share and a Stable EPS estimate of US$11.59 per share, based on weighted future Return on Equity estimates from 10 analysts. The model uses a Cost of Equity of US$7.32 per share, which implies an Excess Return of US$4.27 per share. In other words, the earnings attributed to shareholders are higher than the earnings needed to compensate them for risk.

The Average Return on Equity is 11.02%, while the Stable Book Value is projected at US$105.24 per share, based on estimates from 13 analysts. Combining these inputs, the Excess Returns model arrives at an estimated intrinsic value of about US$220.83 per share.

Compared with the recent share price of US$95.09, this suggests the stock screens as significantly undervalued, with an intrinsic discount of about 56.9%.

Result: UNDERVALUED

Our Excess Returns analysis suggests Pinnacle Financial Partners is undervalued by 56.9%. Track this in your watchlist or portfolio, or discover 874 more undervalued stocks based on cash flows.