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TriCo Bancshares (TCBK) stock is in focus after First Hawaiian agreed to acquire the California bank in an all stock transaction valued at about US$2b. TriCo shareholders are set to receive 2.095 First Hawaiian shares per TriCo share.
See our latest analysis for TriCo Bancshares.
The acquisition news has come on top of strong recent momentum for TriCo Bancshares, with an 11.99% 1 day share price return and a 27.40% year to date share price return. The 1 year total shareholder return of 43.90% points to gains building over a longer horizon.
If this deal has you looking beyond regional banks, it could be a good time to widen your search and check out 18 top founder-led companies
After TriCo Bancshares' sharp move on the deal news, the stock now sits slightly above the average analyst target yet still appears to trade at an intrinsic discount. Is the market being too cautious about the combined bank's value, or not cautious enough?
Price-to-Earnings of 14.9x: Is it justified?
TriCo Bancshares closed at $60.07, and on a P/E of 14.9x the stock sits above the US Banks industry average yet below the peer group average, which raises a clear question about how much earnings strength is already reflected in the price.
The P/E multiple compares the current share price to earnings per share. For a bank like TriCo Bancshares it is a quick way to see how much investors are paying for each dollar of profit. A higher P/E can imply the market is willing to pay up for earnings quality, consistency or growth, while a lower P/E can point to more muted expectations or perceived risks.
Here, TriCo Bancshares is described as expensive versus the US Banks industry, with its 14.9x P/E above the 12.2x industry average, yet it looks cheap versus a closer peer set trading around 28.3x. At the same time, the current P/E is above an estimated fair P/E of 11.5x that the SWS model implies as a level the market could move towards if sentiment or assumptions normalize, which puts the spotlight on whether recent earnings growth and high quality profits can support the current premium.
Explore the SWS fair ratio for TriCo Bancshares
Result: Price-to-Earnings of 14.9x (ABOUT RIGHT)
However, TriCo Bancshares still faces deal completion and integration risks, and any shift in analyst assumptions or price targets could quickly change how the current valuation looks.
Find out about the key risks to this TriCo Bancshares narrative.
Another View: What the SWS DCF Model Says About TriCo Bancshares
While the P/E of 14.9x suggests TriCo Bancshares trades a little rich versus its fair ratio, the SWS DCF model offers a different perspective. With an estimated future cash flow value of $77.87 per share versus the current $60.07 price, the stock is presented as undervalued. Which signal should carry more weight for you?
Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day ( check out TriCo Bancshares for example ). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 46 high quality undervalued stocks . If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
If the mixed signals around TriCo Bancshares leave you curious rather than certain, use that as a prompt to review the data directly and move quickly while sentiment is in flux. To understand what the market currently views as the upside case, take a closer look at the 4 key rewards
Looking for more investment ideas beyond TriCo Bancshares?
TriCo Bancshares may be in the spotlight today, but your next opportunity could be elsewhere. Keep scanning the market instead of stopping at a single story.
Use the Simply Wall Street Screener to quickly surface other stocks that fit different goals and risk levels while deal driven moves keep markets busy.
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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include TCBK .
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