Today we're going to take a closer look at mid-cap Finance company Western Alliance Bancorporation, whose shares are currently trading at $40.52. We've been asking ourselves whether the company is under or over valued at today's prices... let's perform a brief value analysis to find out!
Western Alliance Bancorporation operates as the bank holding company for Western Alliance Bank that provides various banking products and related services primarily in Arizona, California, and Nevada. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 14.34 and an average price to book (P/B) ratio of 1.57. In contrast, Western Alliance Bancorporation has a trailing 12 month P/E ratio of 4.2 and a P/B ratio of 0.9.
P/B ratios are calculated by dividing the company's market value by its equity's book value. Equity refers to all of the company's assets minus its liabilities. Traditionally, a P/B ratio of around 1 shows that a company is fairly valued, but owing to consistently higher valuations in the modern era, investors generally compare against sector averages.
When we divide Western Alliance Bancorporation's P/E ratio by its expected EPS growth rate of the next five years, we obtain its PEG ratio of -0.37. Since it's negative, the company actually has negative growth expectations, and most investors will probably avoid the stock unless it has an exceptionally low P/E and P/B ratio.
