Is ServisFirst Bancshares (SFBS) a Good Contrarian Stock Pick?

ServisFirst Bancshares may be undervalued with strong growth indicators, but the 3 analysts following the company give it an rating of hold. Their target prices range from $52.0 to $62.0 per share, for an average of $56.5. At today's price of $50.0, ServisFirst Bancshares is trading -11.5% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.

ServisFirst Bancshares, Inc. operates as the bank holding company for ServisFirst Bank that provides various banking services to individual and corporate customers. Based in Birmingham, AL, the mid-cap Finance company has 571 full time employees. ServisFirst Bancshares has not offered a regular dividend during the last year.

ServisFirst Bancshares has a trailing twelve month P/E ratio of 10.5, compared to an average of 14.34 for the Finance sector. Based on its EPS guidance of 3.96, the company has a forward P/E ratio of 12.6.

The average compound growth rate of the company's historical and projected earnings per share is 7.5%. On this basis, the company's PEG ratio is 1.74. However, this growth rate is probably not sustainable. In its place we will use the broader market's estimated 5-year EPS growth rate of 7.2%, which gives us a PEG ratio of 1.81. This suggests ServisFirst Bancshares may be overpriced in terms of a cautious outlook on its earnings growth potential.

ServisFirst Bancshares is overpriced compared to its book value, since its P/B ratio of 2.1 is higher than the sector average of 1.57. The company's shares are currently 13.5% above their Graham number, which suggests that they are not trading at a fair value in terms of earnings and net assets.

2019-12-31 2020-12-31 2021-12-31 2022-12-31
Revenue (k) $311,627 $368,153 $417,955 $504,251
Revenue Growth n/a 18.14% 13.53% 20.65%
Net Margins 47.89% 46.06% 49.7% 49.88%
Net Margins Growth n/a -3.82% 7.9% 0.36%
Earnings Per Share $2.76 $3.13 $3.82 $4.75
EPS Growth n/a 13.41% 22.04% 24.35%
Diluted Shares (MM) 54 54 54 54
Free Cash Flow (k) $161,919 $188,985 $256,882 $268,977
FCF Growth n/a 16.72% 35.93% 4.71%
Capital Expenditures (k) -$2,356 -$2,305 -$9,449 -$3,650
Net Debt / EBITDA -0.97 -3.86 -6.38 -0.96
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.