First Merchants Corporation (NASDAQ:FRME), operating in the financial services industry based in United States, saw a double-digit share price rise of over 10% in the past couple of months on the NASDAQGS. As a stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, what if the stock is still a bargain? Let’s examine First Merchants’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.
What's the opportunity in First Merchants?
Good news, investors! First Merchants is still a bargain right now. My valuation model shows that the intrinsic value for the stock is $54.83, but it is currently trading at US$37.09 on the share market, meaning that there is still an opportunity to buy now. However, given that First Merchants’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
What does the future of First Merchants look like?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. 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. Though in the case of First Merchants, it is expected to deliver a relatively unexciting earnings growth of 6.2%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for First Merchants, at least in the near term.
What this means for you:
Are you a shareholder? Even though growth is relatively muted, since FRME is currently undervalued, it may be a great time to increase your holdings in the stock. However, there are also other factors such as financial health to consider, which could explain the current undervaluation.
Are you a potential investor? If you’ve been keeping an eye on FRME for a while, now might be the time to enter the stock. Its future outlook isn’t fully reflected in the current share price yet, which means it’s not too late to buy FRME. But before you make any investment decisions, consider other factors such as the track record of its management team, in order to make a well-informed investment decision.
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 First Merchants 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.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.