On Friday, Merchants Bancorp (NASDAQ:MBIN) saw its price target increased by Piper Sandler to $58.50, up from the previous $53.00, while retaining an Overweight rating on the stock. The adjustment comes after Merchants Bancorp's strong performance at the start of the year, which exceeded pre-provision net revenue (PPNR) expectations by 8%, excluding mortgage servicing rights fair value marks.
The firm's analyst highlighted Merchants Bancorp's distinctive and diversified business model and its short, matched duration balance sheet profile as key factors that should safeguard the company's profitability, which is already higher than average, in any interest rate environment. Despite a recent uptick in non-performing loans (NPLs), the analyst expressed high confidence that net charge-offs (NCOs) would continue to stay below the levels seen by peer companies.
Piper Sandler has also revised its operating earnings per share (EPS) estimates for Merchants Bancorp for the years 2024 and 2025, increasing them by 22% to $6.40 and $5.85, respectively. This revision is based on the first quarter's performance and higher net interest income (NII) assumptions. While acknowledging the challenges in modeling Merchants Bancorp's performance due to potential quarterly variations, the analyst remains confident in the bank's ability to sustain above-average profitability and tangible book value growth.
The new price target of $58.50 reflects a valuation multiple of 10.0 times the firm's estimated 2025 earnings per share, a decrease of 1.0 times from the previous multiple to align with lower peer multiples. However, Merchants Bancorp is still being valued at a premium compared to its peers, which stand at a 9.5 times multiple, due to the bank's unique business attributes as mentioned by the analyst.
InvestingPro Insights
Merchants Bancorp (NASDAQ:MBIN) has been a topic of interest for investors and analysts alike, and recent data from InvestingPro provides additional context to Piper Sandler's optimistic outlook. The company's market capitalization stands at a robust $1.97 billion, reflecting its significant presence in the market. With a P/E ratio of 6.72 and an adjusted P/E ratio for the last twelve months as of Q1 2024 at 6.98, Merchants Bancorp trades at a low earnings multiple, which could indicate that the stock is undervalued relative to its earnings growth. This aligns with the analyst’s note on the company's profitability and suggests room for potential upside.
InvestingPro Tips highlight that Merchants Bancorp has raised its dividend for seven consecutive years and analysts have revised their earnings upwards for the upcoming period, signaling confidence in the company's financial health and future prospects. Moreover, the company has demonstrated significant returns, with a 10.19% price total return over the last week and an impressive 87.63% over the past year. Such performance is indicative of the strong investor sentiment and the company's ability to generate shareholder value over time.
For those seeking more in-depth analysis, additional InvestingPro Tips are available on their platform. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking further insights into Merchants Bancorp's financial metrics and investment potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.