First Financial Bancorp (FFBC) Stock Could Be 38.5% Below Fair Value After Recent Gains

Recent share performance and business profile

First Financial Bancorp (FFBC) has attracted attention after a period of steady share price moves, with the stock recently closing at $32.47 and recording positive total returns over the past year and past 3 months.

The Cincinnati based regional bank operates through First Financial Bank. It focuses on community banking services for individuals and businesses across Ohio, Indiana, Kentucky, and Illinois, including deposits, loans, and various advisory offerings.

See our latest analysis for First Financial Bancorp.

First Financial Bancorp’s recent 1-month share price return of 5.66% and 90-day share price return of 17.47%, alongside a 1-year total shareholder return of 38.84%, point to momentum that investors appear to be reassessing in light of the bank’s current valuation and risk profile.

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With First Financial Bancorp posting solid recent returns and trading only slightly below one price target while some models suggest a larger intrinsic discount, the key question is whether investors are overlooking value or already pricing in future growth.

Price to earnings of 12.2x: Is it justified?

On Simply Wall St’s checks, First Financial Bancorp trades on a P/E of 12.2x, and is flagged as good value both versus a fair P/E estimate of 12.8x and versus a peer average of 15.6x.

The P/E ratio compares what investors are currently paying for each dollar of First Financial Bancorp’s earnings. For a regional bank, this is a straightforward way to see how the market is weighing its profit profile, recent performance and expectations for future earnings growth.

In this case, the indicated fair P/E level sits slightly above the current 12.2x. This suggests the market is assigning a lower earnings multiple than the level that regression based modelling implies it could move toward. At the same time, the stock trades below the 15.6x peer average, so the market is pricing First Financial Bancorp’s earnings at a discount to the broader US banks group. Forecasts still point to earnings growth, and the company reports high quality earnings and a 3.08% dividend.

Against the wider US banks industry average P/E of 11.9x, First Financial Bancorp comes through as only marginally more expensive than the sector overall while still screening as good value on both fair value and peer comparison checks.

Explore the SWS fair ratio for First Financial Bancorp

Result: Price-to-earnings of 12.2x (UNDERVALUED)

However, investors in First Financial Bancorp still need to watch for potential credit quality pressures and any shift in funding costs that could compress its earnings base.

Find out about the key risks to this First Financial Bancorp narrative.

Another view on First Financial Bancorp’s value

Looking beyond the P/E ratio, the SWS DCF model values First Financial Bancorp’s future cash flows at $52.78 per share, compared with today’s $32.47 price. This implies the stock trades about 38.5% below that estimate of fair value. If that gap persists, is the market seeing risks the model does not?

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 First Financial Bancorp 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 44 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

Given the mix of potential upside and flagged concerns around First Financial Bancorp, this is a good time to look through the numbers yourself and decide how you feel about the balance of risk and reward. Then weigh that view alongside the 4 key rewards and 1 important warning sign

Looking for more investment ideas beyond First Financial Bancorp?

If First Financial Bancorp has sharpened your focus on valuation and quality, keep that momentum going and line up a shortlist of other stocks to research next.

• Target reliable income by scanning companies built around consistent payouts with the 7 dividend fortresses
• Hunt for quality at a discount by reviewing companies that screen as attractively priced through the 44 high quality undervalued stocks
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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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