Does Merchants Bancorp’s Valuation Reflect Its Recent Share Price Rebound in 2025?

• If you have ever wondered whether Merchants Bancorp at around $36 a share is quietly trading below its true worth, you are in the right place to dig into the numbers behind that price tag.
• The stock has climbed 5.4% over the last week and 13.3% over the past month, yet it is still only up 0.6% year to date and actually down 5.0% over the last year, all while compounding an impressive 52.7% over three years and 99.2% over five years.
• Recent attention around regional banks and balance sheet quality has put names like Merchants Bancorp back under the spotlight, as investors reassess which lenders are positioned to benefit from shifting interest rate expectations. At the same time, ongoing debates about credit risk and loan growth across the sector have added an extra layer of scrutiny to banks that have already seen big multi year gains.
• On our framework, Merchants Bancorp scores a 5/6 valuation check. This suggests it screens as undervalued on most of the key metrics we track. Next, we will break down what that means across different valuation approaches and hint at a more complete way to judge value that we will come back to at the end.

Find out why Merchants Bancorp's -5.0% return over the last year is lagging behind its peers.

Approach 1: Merchants Bancorp Excess Returns Analysis

The Excess Returns model looks at how much profit Merchants Bancorp can generate above the return that investors demand on its equity, then capitalizes those surplus earnings into an intrinsic value per share.

For Merchants Bancorp, the starting point is a Book Value of $36.48 per share and a Stable EPS of $6.68 per share, based on the median return on equity from the past 5 years. With a Cost of Equity of $4.97 per share, the bank is estimated to produce an Excess Return of $1.71 per share, supported by an Average Return on Equity of 14.57%.

Looking ahead, analysts see Stable Book Value rising to about $45.83 per share, based on weighted future book value estimates from three analysts. Feeding these assumptions into the Excess Returns framework produces an intrinsic value estimate of roughly $68.45 per share.

Compared with the current share price around $36, the model implies the stock is about 47.1% undervalued, under the assumption that these returns are sustained.

Result: UNDERVALUED

Our Excess Returns analysis suggests Merchants Bancorp is undervalued by 47.1%. Track this in your watchlist or portfolio, or discover 908 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Merchants Bancorp.

Approach 2: Merchants Bancorp Price vs Earnings

For a consistently profitable lender like Merchants Bancorp, the price to earnings (PE) ratio is a useful way to judge value because it directly links what investors pay today to the earnings the bank is generating right now.

In general, faster earnings growth and lower perceived risk justify a higher, more "normal" PE ratio, while slower growth or higher risk usually warrant a lower one. Merchants Bancorp currently trades at about 8.3x earnings, well below the Diversified Financial industry average of roughly 13.6x and also under the 11.4x average of its peer group.

Simply Wall St goes a step further with its proprietary Fair Ratio, which estimates what PE a stock should trade on given its growth outlook, margins, risk profile, industry and market cap. For Merchants Bancorp, that Fair Ratio sits at about 14.4x, meaning the shares look inexpensive not just versus peers and the sector, but also relative to what its fundamentals suggest would be reasonable.

Comparing the current 8.3x PE with the 14.4x Fair Ratio points to Merchants Bancorp trading at a meaningful discount to its fundamental value.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1445 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Merchants Bancorp Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to connect your view of a company’s story with hard numbers like future revenue, earnings, margins and fair value. A Narrative on Simply Wall St is your personal storyline for a company, where you set assumptions about how the business will grow, how profitable it can become, and what return you require, and the platform turns that story into a financial forecast and a Fair Value estimate that you can compare directly with today’s share price to inform your decision to buy, hold or sell. Narratives live inside the Community page, are easy to create and adjust, and update dynamically as new information arrives, so your fair value moves as the story evolves. For Merchants Bancorp, one investor might build a Narrative with strong loan growth and resilient margins that supports a much higher fair value than another investor’s more cautious Narrative that assumes slower growth and greater credit risk.

Do you think there's more to the story for Merchants Bancorp? Head over to our Community to see what others are saying!

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.

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