Banks Stocks

M&T Bank Corp Valuation – April 2018 $MTB

Company Profile (excerpt from Reuters): M&T Bank Corporation (M&T), incorporated on November 6, 1969, is a bank holding company. As of December 31, 2016, M&T had two bank subsidiaries: Manufacturers and Traders Trust Company (M&T Bank) and Wilmington Trust, National Association (Wilmington Trust, N.A.). The Company, along with its subsidiaries, offers a range of retail and commercial banking, trust and wealth management, and investment services. The Company’s segments are Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of MTB – April 2018

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 $27,015,319,211 Pass
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 89.42% Pass
5. Moderate PEmg Ratio PEmg < 20 19.42 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.66 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 $9.26
MG Growth Estimate 3.79%
MG Value $148.89
Opinion Overvalued
MG Grade C+
MG Value based on 3% Growth $134.29
MG Value based on 0% Growth $78.72
Market Implied Growth Rate 5.46%
Current Price $179.89
% of Intrinsic Value 120.82%

M&T Bank Corporation qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value 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 $7.39 in 2014 to an estimated $9.26 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 5.46% 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 M&T Bank Corporation revealed the company was trading above its Graham Number of $163. The company pays a dividend of $3 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 19.42, which was below the industry average of 22.06, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

M&T Bank Corporation receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $163.00
PEmg 19.42
PB Ratio 1.66
Dividend Yield 1.67%
TTM Dividend $3.00
Number of Consecutive Years of Dividend Growth 1

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $8,141,430,000
Total Assets $118,593,487,000
Intangible Assets $4,664,701,000
Total Liabilities $102,342,668,000
Shares Outstanding (Diluted Average) 150,325,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $11.80
Dec2017 $8.70
Dec2016 $7.78
Dec2015 $7.18
Dec2014 $7.42
Dec2013 $8.20
Dec2012 $7.54
Dec2011 $6.35
Dec2010 $5.69
Dec2009 $2.89
Dec2008 $5.01
Dec2007 $5.95
Dec2006 $7.37
Dec2005 $6.73
Dec2004 $6.00
Dec2003 $4.95
Dec2002 $4.78
Dec2001 $3.82
Dec2000 $3.44
Dec1999 $3.28
Dec1998 $2.62

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $9.26
Dec2017 $7.95
Dec2016 $7.59
Dec2015 $7.44
Dec2014 $7.39
Dec2013 $6.97
Dec2012 $6.06
Dec2011 $5.28
Dec2010 $4.95
Dec2009 $4.92
Dec2008 $6.03
Dec2007 $6.42
Dec2006 $6.43
Dec2005 $5.73
Dec2004 $5.01
Dec2003 $4.37
Dec2002 $3.91

Recommended Reading:

Other ModernGraham posts about the company

9 Best Stocks For Value Investors This Week – 7/23/16
M&T Bank Corp Valuation – July 2016 $MTB
5 Undervalued Companies for Enterprising Investors Near 52 Week Lows – February 2016
13 Best Stocks For Value Investors This Week – 12/12/15
M&T Bank Corp Valuation – December 2015 Update $MTB

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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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