Independent Bank Corp Valuation – July 2018 $INDB

Company Profile (excerpt from Reuters): Independent Bank Corp., incorporated on June 20, 1985, is a bank holding company. The Company operates through its subsidiary, Rockland Trust Company (the Bank). The Bank is a community-oriented commercial bank. Its community banking business provides a range of banking services, including lending activities, acceptance of demand, savings, and time deposits, and investment management. As of December 31, 2016, the bank had operated 80 full service and three limited service retail branches, 11 commercial banking centers, five investment management offices and one mortgage lending center, all of which located in Eastern Massachusetts.


Downloadable PDF version of this valuation:

ModernGraham Valuation of INDB – July 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 $2,311,089,608 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 114.49% Pass
5. Moderate PEmg Ratio PEmg < 20 26.64 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 2.56 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 $3.40
MG Growth Estimate 8.09%
MG Value $84.01
Opinion Fairly Valued
MG Grade C
MG Value based on 3% Growth $49.35
MG Value based on 0% Growth $28.93
Market Implied Growth Rate 9.07%
Current Price $90.65
% of Intrinsic Value 107.90%

Independent Bank Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with 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 $2.21 in 2014 to an estimated $3.4 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 9.07% 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 Independent Bank Corp revealed the company was trading above its Graham Number of $58.48. The company pays a dividend of $1.28 per share, for a yield of 1.4% Its PEmg (price over earnings per share – ModernGraham) was 26.64, which was above the industry average of 20.05.

Independent Bank Corp receives an average overall rating in the ModernGraham grading system, scoring a C.

Stage 3: Information for Further Research

Graham Number $58.48
PEmg 26.64
PB Ratio 2.56
Dividend Yield 1.41%
TTM Dividend $1.28
Number of Consecutive Years of Dividend Growth 7

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Long-Term Debt & Capital Lease Obligation $158,557,000
Total Assets $8,381,002,000
Intangible Assets $239,724,000
Total Liabilities $7,403,937,000
Shares Outstanding (Diluted Average) 27,581,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $4.42
Dec2017 $3.19
Dec2016 $2.90
Dec2015 $2.50
Dec2014 $2.49
Dec2013 $2.18
Dec2012 $1.95
Dec2011 $2.12
Dec2010 $1.90
Dec2009 $0.88
Dec2008 $1.52
Dec2007 $2.00
Dec2006 $2.17
Dec2005 $2.14
Dec2004 $2.06
Dec2003 $1.79
Dec2002 $1.61
Dec2001 $1.53
Dec2000 $1.06
Dec1999 $1.19
Dec1998 $1.08

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $3.40
Dec2017 $2.81
Dec2016 $2.55
Dec2015 $2.33
Dec2014 $2.21
Dec2013 $1.98
Dec2012 $1.81
Dec2011 $1.73
Dec2010 $1.58
Dec2009 $1.53
Dec2008 $1.90
Dec2007 $2.07
Dec2006 $2.05
Dec2005 $1.94
Dec2004 $1.76
Dec2003 $1.55
Dec2002 $1.39

Recommended Reading:

Other ModernGraham posts about the company

Independent Bank Corp Valuation – Initial Coverage $INDB

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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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