Company Profile (excerpt from Reuters): S&T Bancorp, Inc. (S&T), incorporated on March 17, 1983, is a bank holding company. The Company operates through three segments: Community Banking, Wealth Management and Insurance. The Company’s subsidiaries include S&T Bank, 9th Street Holdings, Inc. and STBA Capital Trust I. It also owns an interest in Commonwealth Trust Credit Life Insurance Company (CTCLIC). The Company’s subsidiary, S&T Bank, is a full service bank. S&T Bank is engaged in providing services to its customers through locations in Pennsylvania, Ohio and New York. S&T Bank has three subsidiaries: S&T Insurance Group, LLC, S&T Bancholdings, Inc. and Stewart Capital Advisors, LLC. The Company is engaged in nonbanking activities through five entities: 9th Street Holdings, Inc.; S&T Bancholdings, Inc.; CTCLIC; S&T Insurance Group, LLC, and Stewart Capital Advisors, LLC. 9th Street Holdings, Inc. and S&T Bancholdings, Inc. are investment holding companies.
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||$1,663,955,911||Fail|
|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||147.87%||Pass|
|5. Moderate PEmg Ratio||PEmg < 20||20.56||Fail|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||1.84||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
|MG Growth Estimate||6.45%|
|MG Value based on 3% Growth||$33.51|
|MG Value based on 0% Growth||$19.65|
|Market Implied Growth Rate||6.03%|
|% of Intrinsic Value||96.13%|
S & T Bancorp Inc is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the small size, high PEmg ratio. 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 $1.62 in 2014 to an estimated $2.31 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 6.03% 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 S & T Bancorp Inc revealed the company was trading above its Graham Number of $40.26. The company pays a dividend of $0.82 per share, for a yield of 1.7% Its PEmg (price over earnings per share – ModernGraham) was 20.56, which was above the industry average of 19.62.
S & T Bancorp Inc 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||5|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||6/1/2018|
|Long-Term Debt & Capital Lease Obligation||$91,681,000|
|Shares Outstanding (Diluted Average)||35,058,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$2.85|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$2.31|
Other ModernGraham posts about the company
|5 Best Stocks for Value Investors This Week – 2/25/17|
|S&T Bancorp Inc Valuation – Initial Coverage $STBA|
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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.