Assessing Northwest Bancshares (NWBI) Valuation As Shares Trade Near US$12 And DCF Signals A Larger Discount

Event-driven snapshot of Northwest Bancshares

Northwest Bancshares (NWBI) recently drew attention after shares closed at US$12.22. This move comes against a backdrop of mixed short-term returns and a stronger showing over longer holding periods.

See our latest analysis for Northwest Bancshares.

Recent trading has been softer, with a 30 day share price return of 8.19% and a 90 day share price return of 4.38%, while the 1 year total shareholder return of 10.07% suggests longer term holders have fared better.

If this bank stock has you thinking about where else value might be hiding, it could be a good time to broaden your search with our 20 top founder-led companies.

So with shares at US$12.22, an indicated intrinsic discount of about 52% and a price target of US$13.86, you have to ask: is Northwest Bancshares quietly undervalued, or is the market already pricing in future growth?

Price-to-Earnings of 14.2x: Is it justified?

On a P/E of 14.2x, Northwest Bancshares trades a little richer than both its closest peers at 13.5x and the broader US banks group at 11.4x, even though our SWS DCF model points to a fair value of $25.69 versus the current $12.22 share price.

The P/E ratio compares the share price to earnings per share, so it is a quick way to see how much investors are paying for each dollar of profit. For a regional bank like Northwest Bancshares, that often reflects what the market thinks about the stability of earnings and how much growth could come through the income statement.

Here, the 14.2x P/E sits above the US banks industry average of 11.4x and above the peer group on 13.5x. This implies investors are already paying a premium for Northwest Bancshares earnings. At the same time, the stock is described as good value relative to an estimated fair P/E of 14.7x, which is only slightly higher than where it trades today and suggests the market could still move closer to that fair ratio level.

Explore the SWS fair ratio for Northwest Bancshares

Result: Price-to-Earnings of 14.2x (ABOUT RIGHT)

However, short term share price pressure, including a 30 day return of 8.19% and a 90 day return of 4.38%, suggests that sentiment could shift quickly if expectations change.

Find out about the key risks to this Northwest Bancshares narrative.

Another view of value: DCF paints a different picture

While the 14.2x P/E suggests Northwest Bancshares is only slightly cheap relative to its fair ratio of 14.7x, our SWS DCF model points to a very different outcome, with a fair value of $25.69 versus the current $12.22. If the cash flow view is closer to reality, is the P/E anchoring you to too low a number?

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 Northwest 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 50 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

With sentiment on Northwest Bancshares looking mixed, it makes sense to move quickly and test the numbers for yourself instead of relying on headlines alone. You can weigh the company’s potential by looking at 4 key rewards and 1 important warning sign and deciding how that balance of risks and rewards fits your own approach.

Looking for more investment ideas?

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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.

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