Northrim BanCorp, Inc. (NASDAQ:NRIM), 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. Less-covered, small caps sees more of an opportunity for mispricing due to the lack of information available to the public, which can be a good thing. So, could the stock still be trading at a low price relative to its actual value? Today I will analyse the most recent data on Northrim BanCorp’s outlook and valuation to see if the opportunity still exists.
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What is Northrim BanCorp worth?
The stock seems fairly valued at the moment according to my relative valuation model. I’ve used the price-to-earnings ratio in this instance because there’s not enough visibility to forecast its cash flows. The stock’s ratio of 15.62x is currently trading slightly above its industry peers’ ratio of 14.61x, which means if you buy Northrim BanCorp today, you’d be paying a relatively fair price for it. And if you believe that Northrim BanCorp should be trading at this level in the long run, there’s only an insignificant downside when the price falls to its real value. In addition to this, it seems like Northrim BanCorp’s share price is quite stable, which could mean there may be less chances to buy low in the future now that it’s fairly valued. This is because the stock is less volatile than the wider market given its low beta.
What kind of growth will Northrim BanCorp generate?
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 47% over the next year, the near-term future seems bright for Northrim BanCorp. 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? NRIM’s optimistic 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 track record of its management team. Have these factors changed since the last time you looked at NRIM? Will you have enough confidence to invest in the company should the price drop below its fair value?
Are you a potential investor? If you’ve been keeping tabs on NRIM, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic forecast is encouraging for NRIM, which 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 Northrim BanCorp. You can find everything you need to know about Northrim BanCorp in the latest infographic research report. If you are no longer interested in Northrim BanCorp, 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 email@example.com.