Westamerica Bancorporation (NASDAQ:WABC), operating in the financial services industry based in United States, received a lot of attention from a substantial price movement on the NasdaqGS over the last few months, increasing to $64.09 at one point, and dropping to the lows of $54.5. Some share price movements can give investors a better opportunity to enter into the stock, and potentially buy at a lower price. A question to answer is whether Westamerica Bancorporation’s current trading price of $57.25 reflective of the actual value of the small-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at Westamerica Bancorporation’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change.
What is Westamerica Bancorporation worth?
According to my relative valuation model, the stock is currently overvalued. In this instance, I’ve used the price-to-earnings (PE) ratio given that there is not enough information to reliably forecast the stock’s cash flows. I find that Westamerica Bancorporation’s ratio of 26.83x is above its peer average of 14.81x, which suggests the stock is overvalued compared to the Banks industry. Another thing to keep in mind is that Westamerica Bancorporation’s share price is quite stable relative to the rest of the market, as indicated by its low beta. This means that if you believe the current share price should move towards its intrinsic value over time, a low beta could suggest it is not likely to reach that level anytime soon, and once it’s there, it may be hard to fall back down into an attractive buying range again.
What kind of growth will Westamerica Bancorporation generate?
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. With profit expected to grow by 36% over the next year, the near-term future seems bright for Westamerica Bancorporation. It looks like higher cash flow is on the cards for the stock, which should feed into a higher share valuation.
What this means for you:
Are you a shareholder? WABC’s optimistic future growth appears to have been factored into the current share price, with shares trading above its fair value. At this current price, shareholders may be asking a different question – should I sell? If you believe WABC 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 an eye on WABC for a while, now may not be the best time to enter into the stock. The price has surpassed its industry peers, which means it is likely that there is no more upside from mispricing. However, the optimistic prospect is encouraging for WABC, 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 Westamerica Bancorporation. You can find everything you need to know about Westamerica Bancorporation in the latest infographic research report. If you are no longer interested in Westamerica Bancorporation, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see past 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. For errors that warrant correction please contact the editor at firstname.lastname@example.org.