Banks Stocks

Simmons First National Corporation Valuation – Initial Coverage $SFNC

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Stocks for Using A Benjamin Graham Value Investing Strategy – December 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Simmons First National Corporation (SFNC) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Simmons First National Corporation is a financial holding company. The Company’s subsidiary bank is Simmons First National Bank (Simmons Bank), a national bank. Simmons Bank and its subsidiaries provide banking services to individuals and businesses across the market areas they serve. Simmons Bank offers consumer, real estate and commercial loans, checking, savings and time deposits. It also offers a range of products and services, including credit cards, trust services, investments, agricultural finance lending, equipment lending, insurance, consumer finance and small business administration (SBA) lending. The Company conducts its banking operations through approximately 150 branches or financial centers, located in communities throughout Arkansas, Missouri, and Kansas. Its loan portfolios were loans to businesses (commercial loans, commercial real estate loans and agricultural loans) and individuals (consumer loans, credit card loans and single-family residential real estate loans).

SFNC Chart

SFNC data by YCharts

[level-free]
To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Recent valuations of the components of the Dow Jones Industrial Average are available for free members, including this one of Microsoft Corporation.  In addition, here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of SFNC – January 2017

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $1,982,739,635 Fail
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 38.78% Pass
5. Moderate PEmg Ratio PEmg < 20 26.01 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.69 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $2.42
MG Growth Estimate 6.00%
MG Value $49.56
Opinion Overvalued
MG Grade C-
MG Value based on 3% Growth $35.07
MG Value based on 0% Growth $20.56
Market Implied Growth Rate 8.75%
Current Price $62.90
% of Intrinsic Value 126.92%

Simmons First National Corporation is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, high PEmg ratio. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Overvalued after growing its EPSmg (normalized earnings) from $1.73 in 2012 to an estimated $2.42 for 2016. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.75% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value below the price.

At the time of valuation, further research into Simmons First National Corporation revealed the company was trading above its Graham Number of $49.68. The company pays a dividend of $0.95 per share, for a yield of 1.5% Its PEmg (price over earnings per share – ModernGraham) was 26.01, which was above the industry average of 21.43.

Simmons First National Corporation receives an average overall rating in the ModernGraham grading system, scoring a C-.

Stage 3: Information for Further Research

Graham Number $49.68
PEmg 26.01
PB Ratio 1.69
Dividend Yield 1.51%
TTM Dividend $0.95
Number of Consecutive Years of Dividend Growth 5

[/not-level-free]

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2016
Long-Term Debt & Capital Lease Obligation $275,566,000
Total Assets $8,226,992,000
Intangible Assets $403,037,000
Total Liabilities $7,079,851,000
Shares Outstanding (Diluted Average) 30,828,000

Earnings Per Share History

Next Fiscal Year Estimate $2.99
Dec2015 $2.63
Dec2014 $2.11
Dec2013 $1.42
Dec2012 $1.64
Dec2011 $1.47
Dec2010 $2.15
Dec2009 $1.74
Dec2008 $1.91
Dec2007 $1.92
Dec2006 $1.90
Dec2005 $1.84
Dec2004 $1.65
Dec2003 $1.65
Dec2002 $1.54
Dec2001 $1.16
Dec2000 $1.29
Dec1999 $1.17
Dec1998 $1.12
Dec1997 $1.03
Dec1996 $0.89

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $2.42
Dec2015 $2.04
Dec2014 $1.75
Dec2013 $1.61
Dec2012 $1.73
Dec2011 $1.79
Dec2010 $1.95
Dec2009 $1.85
Dec2008 $1.88
Dec2007 $1.84
Dec2006 $1.78
Dec2005 $1.67
Dec2004 $1.54
Dec2003 $1.44
Dec2002 $1.31
Dec2001 $1.18
Dec2000 $1.16

Recommended Reading:

Other ModernGraham posts about the company

None.  This is the first time ModernGraham has covered the company.

Other ModernGraham posts about related companies

Ingredion Inc Valuation – Initial Coverage $INGR
City Holding Company Valuation – Initial Coverage $CHCO
Southside Bancshares Inc Valuation – Initial Coverage $SBSI
Independent Bank Corp Valuation – Initial Coverage $INDB
Cullen/Frost Bankers Inc Valuation – Initial Coverage $CFR
Signature Bank Valuation – Initial Coverage $SBNY
Cardinal Financial Corp Valuation – Initial Coverage $CFNL
Citizens Financial Group Inc Valuation – Initial Coverage $CFG
BB&T Corporation Valuation – November 2016 $BBT
SunTrust Banks Inc Valuation – August 2016 $STI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Leave a Reply

Your email address will not be published. Required fields are marked *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Back To Top