First Merchants Corporation (NASDAQ:FRME), operating in the financial services industry based in United States, had a relatively subdued couple of weeks in terms of changes in share price, which continued to float around the range of $37.42 to $41.09. However, is this the true valuation level of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at FRME’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. See our latest analysis for FRME
What is FRME worth?
My valuation model shows that the stock’s value should be $17.46 but it is currently trading at $38.59 on the share market, meaning that the opportunity to buy FRME at a good price has disappeared! Furthermore, FRME’s share price also seems relatively stable compared to the rest of the market, as indicated by its low beta. If you believe the share price should eventually reach its true value, a low beta could suggest it is unlikely to rapidly do so anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range.
Can we expect growth from FRME?
Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares.Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. With profit expected to grow by 54.75% over the next couple of years, the future seems bright for FRME. It looks like higher cash flows is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? It seems like the market has well and truly priced in FRME’s positive outlook, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe FRME should trade below its current price, selling high and buying it back up again when its price falls towards its real value can be profitable. But before you make this decision, take a look at whether its fundamentals have changed.
Are you a potential investor? If you’ve been keeping tabs on FRME for some time, now may not be the best time to enter into the stock. The price has surpassed its true value, which means there’s no upside from mispricing. However, the positive outlook is encouraging for FRME, which means it’s worth diving deeper into other factors in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on First Merchants. You can find everything you need to know about FRME in the latest infographic research report. If you are no longer interested in First Merchants, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.