The best investors are not afraid to go against the grain. And an investment in West Bancorporation, which has an average analyst rating of only hold, would certainly fit the bill. Might patient investors be able to find value in this stock? Let's dive into numbers and see for ourselves.
Over the last year, West Bancorporation shares have moved -25.9% while trading between the prices of $15.04 and $26.26. This represents a -38.0% difference compared to the S&P 500, which moved 12.0% over the last 52 weeks.
At its current price of $17.87 per share, WTBA has a trailing price to earnings (P/E) ratio of 7.3 based on its 12 month trailing earnings per share of $2.45. Considering its future earnings estimates of $1.5 per share, the stock's forward P/E ratio is 11.9. In comparison, the average P/E ratio of the Finance sector is 14.34 and the average P/E ratio of the S&P 500 is 15.97.
We can also compare the ratio of West Bancorporation's price to its book value. A company's book value refers to its present equity value: what is left when we subtract its liabilities from its assets. WTBA has a book value of 1.38, with anything close or below one indicating a potentially undervalued company.
The final element of our analysis will touch on West Bancorporation's capacity to generate cash for the benefit of its shareholders or for reinvesting in the business. For this, we look at the company's levered free cash flow, which is the sum of all incoming and outgoing cash flows, including the servicing of current debt and liabilities. West Bancorporation has a free cash flow of $38.13 Million, which it uses to pay its shareholders a 5.5% dividend.
At Market Inference, we will keep monitoring West Bancorporation to see if the contrarian thesis in this stock will be vindicated. Going against the grain can be an excellent way for investors to extract value from the stock market, but it's never a good idea to apply a strategy for its own sake. Do your own research and make sure that the facts support your decision.
