Can Valley National Bancorp (VLY) Stay Reasonable After Its Chicago Deal?
Valley National Bancorp stock has put in a strong 3 year run, yet the current checks still point to a company that screens cheap on both intrinsic value estimates and market multiples. With an "Excess Returns" intrinsic value model suggesting meaningful undervaluation and the traded price yet to close that gap, investors are weighing how much of the story is already reflected in the share price.
- Over the past 3 years, Valley National Bancorp has returned about 74.7%, which puts more focus on whether the current share price still leaves room relative to its intrinsic value estimate.
- The agreed acquisition of Providence Financial Corp. may support Valley National Bancorp's funding mix and growth in the Chicago area. At the same time, the usual integration and regulatory risks around closing a bank deal could affect how quickly any value flows through to shareholders.
- On the broader checks, Valley National Bancorp looks undervalued in 6 of 6 tests, so the stock leans cheap overall based on this composite value score of 6.
The stock's next move may depend on whether Valley National Bancorp's current price of US$13.95 closes the gap implied by the intrinsic value estimate or instead settles closer to its recent trading range.
Compare Valley National Bancorp's valuation setup with a curated group of banks and financials that also screen as cheap using the 46 high quality undervalued stocks.
Is Valley National Bancorp Still Cheap on Excess Returns?
The Excess Returns model looks at how much profit Valley National Bancorp generates over and above the return that shareholders are assumed to require. For this stock, the inputs point to a return on equity that sits above that hurdle. This creates a stream of excess earnings that can be capitalised into an intrinsic value estimate.
The model uses a Book Value of $13.67 per share and a Stable EPS of $1.53 per share, based on weighted future return on equity estimates from 9 analysts, against a Cost of Equity of $1.09 per share. That gap translates into an Excess Return of $0.44 per share, with an Average Return on Equity of 10.18% and a Stable Book Value of $15.02 per share based on forecasts from 10 analysts. Putting these together gives an Excess Returns intrinsic value of $27.55 per share, which is above the current $13.95 share price and implies the stock is 49.4% undervalued. The planned Providence Financial Corp. acquisition may introduce additional execution and regulatory risk, and the discount may partly reflect those uncertainties.
On this Excess Returns view, Valley National Bancorp stock currently screens as undervalued relative to its estimated intrinsic worth.
Our Excess Returns analysis suggests Valley National Bancorp is undervalued by 49.4%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.
Is Valley National Bancorp a Bargain on Earnings?
P/E is a useful starting point for Valley National Bancorp because earnings are a key driver for how investors typically value banks. On this measure, Valley National Bancorp trades on a P/E of about 11.6x, which is slightly below the broader banks industry average of around 11.8x and also below the peer group average of roughly 14.1x.
The internal model that blends factors such as industry, size and risk points to a fair P/E ratio of about 14.7x for Valley National Bancorp. That is a clear gap to the current 11.6x multiple and indicates the stock is pricing in a discount relative to what those fundamentals might support. The stock therefore appears cheap on earnings relative to both direct peers and this more tailored fair multiple.
On the P/E multiple, Valley National Bancorp stock appears undervalued compared with both its banking peers and its modelled fair earnings ratio.
See what the numbers say about this price — find out in our valuation breakdown.
The Valley National Bancorp Narrative: What Would Justify Today's Price?
Simply Wall St Narratives pick up where the valuation work on Valley National Bancorp leaves off and spell out the specific growth, margin and earnings paths that would need to play out for the stock to be worth materially more or less than today’s price on the Community page. Instead of a single ratio or model output, they unpack the future that number relies on so you can see what needs to happen and track whether it does.
Share a narrative on Valley National Bancorp stock to put your own numbers-driven view on whether the planned Providence Financial Corp. acquisition delivers on its promise, and track how that thesis holds up as new results land. Add your voice to the Simply Wall St community and lay out the valuation, earnings and execution path you think could justify today’s share price.
Do you think there's more to the story for Valley National Bancorp? Head over to our Community to see what others are saying!
The Bottom Line
Valley National Bancorp screens as undervalued on both the Excess Returns intrinsic value estimate and on earnings multiples, so the valuation work is broadly pointing in the same direction. The crux is whether the bank can deliver the earnings and return on equity profile that underpins that intrinsic value, while managing execution and regulatory risks tied to the Providence Financial Corp. acquisition. For investors, the key question is whether the current discount reflects an opportunity for rerating, or whether the market is correctly pricing in those risks and keeping the stock on a lower multiple.
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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