Signature Bank Valuation – Initial Coverage $SBNY

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 – August 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 Signature Bank (SBNY) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Signature Bank is a full-service commercial bank. The Bank operates over 30 private client offices throughout the New York metropolitan area. Its segments include Commercial Banking and Specialty Finance. It offers a range of business and personal banking products and services. Its specialty finance subsidiary, Signature Financial LLC (Signature Financial), provides equipment finance and leasing services. Signature Securities Group Corporation, a subsidiary of Bank, is a licensed broker-dealer, investment advisor offering investment, brokerage, asset management and insurance products and services. The Commercial Banking segment consists of commercial real estate lending, commercial and industrial lending, and commercial deposit gathering activities. The Specialty Finance segment consists of financing and leasing products, including equipment, transportation, taxi medallion, commercial marine, commercial vehicle, municipal and national franchise financing and/or leasing.

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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.


Downloadable PDF version of this valuation:

ModernGraham Valuation of SBNY – December 2016

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 $8,372,831,096 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 493.26% Pass
5. Moderate PEmg Ratio PEmg < 20 22.93 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.35 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 Fail
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

EPSmg $6.66
MG Growth Estimate 15.00%
MG Value $256.31
Opinion Undervalued
MG Grade F
MG Value based on 3% Growth $96.53
MG Value based on 0% Growth $56.59
Market Implied Growth Rate 7.22%
Current Price $152.68
% of Intrinsic Value 59.57%

Signature Bank does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of dividends. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.96 in 2012 to an estimated $6.66 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.22% 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 above the price.

At the time of valuation, further research into Signature Bank revealed the company was trading above its Graham Number of $107.57. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 22.93, which was above the industry average of 13.43.

Signature Bank scores quite poorly in the ModernGraham grading system, with an overall grade of F.

Stage 3: Information for Further Research

Graham Number $107.57
PEmg 22.93
PB Ratio 2.35
Dividend Yield 0.00%
TTM Dividend $0.00
Number of Consecutive Years of Dividend Growth 0


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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2016
Long-Term Debt & Capital Lease Obligation $2,636,354,000
Total Assets $36,546,835,000
Intangible Assets $0
Total Liabilities $33,052,349,000
Shares Outstanding (Diluted Average) 53,886,000

Earnings Per Share History

Next Fiscal Year Estimate $7.90
Dec2015 $7.27
Dec2014 $5.95
Dec2013 $4.76
Dec2012 $3.91
Dec2011 $3.37
Dec2010 $2.46
Dec2009 $1.30
Dec2008 $1.35
Dec2007 $0.91
Dec2006 $1.12
Dec2005 $0.53
Dec2004 $1.15

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $6.66
Dec2015 $5.71
Dec2014 $4.65
Dec2013 $3.72
Dec2012 $2.96
Dec2011 $2.28
Dec2010 $1.63
Dec2009 $1.16
Dec2008 $1.06
Dec2007 $0.86
Dec2006 $0.74
Dec2005 $0.48
Dec2004 $0.38

Recommended Reading:

Other ModernGraham posts about the company

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

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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.

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