Banks Stocks

ServisFirst Bancshares Inc Valuation – July 2018 $SFBS

Company Profile (excerpt from Reuters): ServisFirst Bancshares, Inc., incorporated on August 16, 2007, is a bank holding company whose business is conducted by its subsidiary, ServisFirst Bank (the Bank). The Company’s principal business is to accept deposits from the public and to make loans and other investments. The Company, through its bank, originates commercial, consumer and other loans; accept deposits; provides electronic banking services, such as online and mobile banking, including remote deposit capture, deliver treasury and cash management services, and provides correspondent banking services to other financial institutions. The Company offers a range of products and services, including round the clock telephone banking, direct deposit, Internet banking, mobile banking, traveler’s checks, safe deposit boxes, attorney trust accounts and automatic account transfers. It also participates in a shared network of automated teller machines and a debit card system. Additionally, it offers Visa credit cards.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SFBS – 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 $2,190,725,210 Pass
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 872.79% Pass
5. Moderate PEmg Ratio PEmg < 20 23.09 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 3.48 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 $1.82
MG Growth Estimate 15.00%
MG Value $70.04
Opinion Undervalued
MG Grade C+
MG Value based on 3% Growth $26.38
MG Value based on 0% Growth $15.46
Market Implied Growth Rate 7.30%
Current Price $42.01
% of Intrinsic Value 59.98%

ServisFirst Bancshares, Inc. is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability over the last ten years, and 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 Undervalued after growing its EPSmg (normalized earnings) from $0.85 in 2014 to an estimated $1.82 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 7.3% 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 ServisFirst Bancshares, Inc. revealed the company was trading above its Graham Number of $25.28. The company pays a dividend of $0.2 per share, for a yield of 0.5% Its PEmg (price over earnings per share – ModernGraham) was 23.09, which was above the industry average of 20.05.

ServisFirst Bancshares, Inc. receives an average overall rating in the ModernGraham grading system, scoring a C+.

Stage 3: Information for Further Research

Graham Number $25.28
PEmg 23.09
PB Ratio 3.48
Dividend Yield 0.48%
TTM Dividend $0.20
Number of Consecutive Years of Dividend Growth 4

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Long-Term Debt & Capital Lease Obligation $64,648,000
Total Assets $7,084,562,000
Intangible Assets $14,584,000
Total Liabilities $6,429,448,000
Shares Outstanding (Diluted Average) 54,196,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.48
Dec2017 $1.72
Dec2016 $1.52
Dec2015 $1.20
Dec2014 $1.05
Dec2013 $0.95
Dec2012 $0.83
Dec2011 $0.59

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $1.82
Dec2017 $1.42
Dec2016 $1.22
Dec2015 $1.02
Dec2014 $0.85
Dec2013 $0.65
Dec2012 $0.43
Dec2011 $0.20

Recommended Reading:

Other ModernGraham posts about the company

ServisFirst Bancshares Inc Valuation – Initial Coverage $SFBS

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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.

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