ServisFirst Bancshares Inc Valuation – Initial Coverage $SFBS
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 ServisFirst Bancshares Inc (SFBS) fares in the ModernGraham valuation model.
Company Profile (obtained from Google Finance): ServisFirst Bancshares, Inc. is a bank holding company. The Company, through its subsidiary, ServisFirst Bank (the Bank), operates approximately 18 banking offices. Through its bank, the Company originates commercial, consumer and other loans and accepts deposits, provides electronic banking services, such as online and mobile banking, including remote deposit capture, delivers treasury and cash management services, and provides correspondent banking services to other financial institutions. The Company also offers a range of products and services, including around the clock telephone banking, direct deposit, Internet banking, mobile banking, traveler’s checks, safe deposit boxes, attorney trust accounts and automatic account transfers. The Company also participates in a shared network of automated teller machines (ATMs) and a debit card system that its customers are able to use throughout Alabama and in other states. Additionally, the Company offers Visa credit cards.
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Downloadable PDF version of this valuation:
ModernGraham Valuation of SFBS – 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 | $1,943,280,971 | Fail | |
| 2. Earnings Stability | Positive EPS for 10 years prior | Fail | ||
| 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 | 12216566.67% | Pass | |
| 5. Moderate PEmg Ratio | PEmg < 20 | 31.60 | Fail | |
| 6. Moderate Price to Assets | PB Ratio < 2.5 OR PB*PEmg < 50 | 3.97 | Fail | |
| 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 | $1.18 |
| MG Growth Estimate | 15.00% |
| MG Value | $45.61 |
| Opinion | Fairly Valued |
| MG Grade | C- |
| MG Value based on 3% Growth | $17.18 |
| MG Value based on 0% Growth | $10.07 |
| Market Implied Growth Rate | 11.55% |
| Current Price | $37.44 |
| % of Intrinsic Value | 82.09% |
ServisFirst Bancshares, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, insufficient earnings stability over the last ten years, the poor dividend history, and the high PEmg and PB ratios. 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 Fairly Valued after growing its EPSmg (normalized earnings) from $0.43 in 2012 to an estimated $1.18 for 2016. This level of demonstrated earnings growth supports the market’s implied estimate of 11.55% 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 within a margin of safety relative to the price.
At the time of valuation, further research into ServisFirst Bancshares, Inc. revealed the company was trading above its Graham Number of $17.59. The company pays a dividend of $0.15 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 31.6, which was above the industry average of 21.43.
ServisFirst Bancshares, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C-.
Stage 3: Information for Further Research
| Graham Number | $17.59 |
| PEmg | 31.60 |
| PB Ratio | 3.97 |
| Dividend Yield | 0.40% |
| TTM Dividend | $0.15 |
| Number of Consecutive Years of Dividend Growth | 3 |
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| ModernGraham tagged articles | Morningstar |
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Most Recent Balance Sheet Figures
| Balance Sheet Information | 9/1/2016 |
| Long-Term Debt & Capital Lease Obligation | $55,356,000 |
| Total Assets | $6,002,621,000 |
| Intangible Assets | $15,073,000 |
| Total Liabilities | $5,495,132,000 |
| Shares Outstanding (Diluted Average) | 53,879,000 |
Earnings Per Share History
| Next Fiscal Year Estimate | $1.43 |
| Dec2015 | $1.20 |
| Dec2014 | $1.05 |
| Dec2013 | $0.95 |
| Dec2012 | $0.83 |
| Dec2011 | $0.59 |
Earnings Per Share – ModernGraham History
| Next Fiscal Year Estimate | $1.18 |
| Dec2015 | $1.02 |
| Dec2014 | $0.85 |
| Dec2013 | $0.66 |
| Dec2012 | $0.43 |
| Dec2011 | $0.20 |
Recommended Reading:
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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.
