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At US$34.77, Is Mercantile Bank Corporation (NASDAQ:MBWM) Worth Looking At Closely?

Simply Wall St

Mercantile Bank Corporation (NASDAQ:MBWM), operating in the financial services industry based in United States, led the NASDAQGS gainers with a relatively large price hike in the past couple of weeks. 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 Mercantile Bank’s valuation and outlook in more detail to determine if there’s still a bargain opportunity.

See our latest analysis for Mercantile Bank

What’s the opportunity in Mercantile Bank?

The stock seems fairly valued at the moment according to my valuation model. It’s trading around 3.38% above my intrinsic value, which means if you buy Mercantile Bank today, you’d be paying a relatively reasonable price for it. And if you believe the company’s true value is $33.63, then there isn’t really any room for the share price grow beyond what it’s currently trading. In addition to this, Mercantile Bank has a low beta, which suggests its share price is less volatile than the wider market.

What does the future of Mercantile Bank look like?

NasdaqGS:MBWM Past and Future Earnings, February 28th 2019
NasdaqGS:MBWM Past and Future Earnings, February 28th 2019

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 Mercantile Bank, it is expected to deliver a relatively unexciting earnings growth of 8.7%, which doesn’t help build up its investment thesis. Growth doesn’t appear to be a main reason for a buy decision for the company, at least in the near term.

What this means for you:

Are you a shareholder? MBWM’s future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at the stock? Will you have enough conviction to buy should the price fluctuates below the true value?

Are you a potential investor? If you’ve been keeping tabs on MBWM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the positive outlook means it’s worth further examining other factors such as the strength of its balance sheet, 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 Mercantile Bank. You can find everything you need to know about Mercantile Bank in the latest infographic research report. If you are no longer interested in Mercantile Bank, 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 editorial-team@simplywallst.com. 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.