On Thursday, Stephens, a financial services firm, revised its outlook on SmartFinancial (NASDAQ: NYSE:SMBK) shares, increasing the price target to $27.00 from the previous $26.00, while retaining an Overweight rating on the shares.
The firm's analysis points to SmartFinancial's successful strategies in expanding its economies of scale both organically and through acquisitions. The bank's net interest margin (NIM) is expected to rise steadily, which is anticipated to enhance its return profile to align more closely with that of its peers.
According to the firm, if SmartFinancial achieves its projected second half of 2025 target of approximately $50 million in quarterly revenue, this performance would not only surpass the firm's estimate of $46 million but would also result in a return on assets (ROA) exceeding 1%, a figure that is above the average for its peer group. This robust financial outlook is seen as a potential driver for the bank's stock multiple to expand.
The firm also noted that SmartFinancial's capital ratios are at their internal targets, with a tangible common equity (TCE) ratio of 7.4% and a common equity tier 1 (CET-1) ratio of 10.1%. These strong capital positions are expected to support the initiation of an active stock buyback program in the second quarter, with the aim of completing the authorization by the end of the year.
SmartFinancial's unique position as the fourth largest bank based in Tennessee and the largest bank with assets under $10 billion in the southern region of the state was highlighted as a scarcity value.
The firm believes that the current trading price of SmartFinancial at just 1.1 times the tangible book value (TBV), or 1.0 times when adjusted for accumulated other comprehensive income (AOCI), does not fully reflect the bank's fundamental upside potential. The firm's analysis suggests that the scarcity value could serve as an additional benefit to the stock's valuation.
In summary, the firm's revised price target represents a 16% increase from the current trading price, indicating a positive outlook for SmartFinancial's share performance in the near future.
InvestingPro Insights
SmartFinancial's commitment to growth and shareholder value is evident in its decision to raise its dividend for five consecutive years, a testament to its financial stability and management's confidence in the company's future. This aligns with Stephens' optimistic view on the bank's economies of scale and expected net interest margin improvements. Reflecting on the company's recent performance, SmartFinancial has demonstrated a strong return over the last month, with a 16.0% increase in price total return, showcasing investor confidence in the bank's strategies and market position.
With a market capitalization of approximately $398.58 million and a price-to-earnings (P/E) ratio of 14.82, SmartFinancial appears to be valued reasonably in relation to its earnings. Moreover, the bank's price-to-book (P/B) ratio of 0.86 suggests that the shares might be undervalued, especially considering the firm's belief in the stock's fundamental upside potential and scarcity value. Analysts on InvestingPro have also predicted that the company will be profitable this year, reinforcing the positive sentiment. For investors seeking more in-depth analysis, InvestingPro offers additional InvestingPro Tips that can further inform investment decisions. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking insights that could be crucial to making informed investment choices.
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