Company Profile (excerpt from Reuters): Signature Bank, incorporated in September 2000, 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. The Bank 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 (Signature Securities), a subsidiary of Bank, is a licensed broker-dealer, investment advisor offering investment, brokerage, asset management and insurance products and services.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass all 6 of the following tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$6,501,390,093||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||222.02%||Pass|
|5. Moderate PEmg Ratio||PEmg < 20||15.28||Pass|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||1.57||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
|MG Growth Estimate||9.40%|
|MG Value based on 3% Growth||$109.65|
|MG Value based on 0% Growth||$64.28|
|Market Implied Growth Rate||3.39%|
|% of Intrinsic Value||55.96%|
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. 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 $4.65 in 2014 to an estimated $7.56 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.39% 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 below its Graham Number of $118.23. The company does not pay a dividend. Its PEmg (price over earnings per share – ModernGraham) was 15.28, which was below the industry average of 20.05, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Signature Bank receives an average overall rating in the ModernGraham grading system, scoring a C+.
Stage 3: Information for Further Research
|Number of Consecutive Years of Dividend Growth||0|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||3/1/2018|
|Long-Term Debt & Capital Lease Obligation||$4,542,577,000|
|Shares Outstanding (Diluted Average)||54,395,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$8.47|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$7.56|
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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.