What the recent price move says about Republic Bancorp

Republic Bancorp (RBCA.A) shares recently closed at $73.39, with a 4.5% decline over the past day and a 2.8% decline over the past week, while still showing positive returns over the month and the past 3 months.

The recent 1 day and 7 day share price declines sit against a 30 day share price return of 6.0% and a year to date share price return of 7.9%, while the 1 year total shareholder return of 12.4% and 3 year total shareholder return of just over 2x suggest momentum has been building over time rather than fading.

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With Republic Bancorp trading at $73.39 and sitting at roughly a 25% intrinsic discount plus about 9% below the average analyst target of $80, the question is whether there is meaningful upside or whether the market is already pricing in future growth.

Price-to-Earnings of 11.4x: Is it justified?

On a simple earnings lens, Republic Bancorp trades on a P/E of 11.4x, which sits slightly below the US Banks industry average of 11.5x and below the peer group average of 15.8x.

The P/E ratio compares the current share price to the company’s earnings per share, so it effectively shows how much investors are paying for each dollar of profit. For a bank like Republic Bancorp that reports high quality earnings, a mid range P/E can signal that the market is not attaching a premium to those profits, even with steady earnings growth of 6.8% per year over the past 5 years and profit growth of 7.3% over the past year.

Relative to the broader US Banks industry, Republic Bancorp’s 11.4x P/E suggests the shares are priced roughly in line with sector earnings, but the comparison with the estimated fair P/E of 9.5x points the other way, implying the current multiple is higher than the level the market could potentially move towards if sentiment cools. Set against peers on 15.8x, the stock screens as cheaper on earnings, which highlights the tension between peer based and fair value based comparisons.

Result: Price-to-Earnings of 11.4x (ABOUT RIGHT)

However, the thesis can be tested quickly if earnings growth stalls, or if the fair P/E of 9.5x begins to anchor broader market expectations.

Another way to look at Republic Bancorp's value

While the P/E of 11.4x looks roughly in line with US banks at 11.5x and cheaper than peers at 15.8x, the fair ratio of 9.5x hints at a lower level the multiple could drift toward if sentiment cools. This raises the question of how much valuation cushion you really have.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Republic Bancorp for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 54 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

The mix of recent gains and pullbacks might leave you unsure about the overall message, so it helps to look at the data directly and move quickly while the picture is fresh in your mind. To round out your view, take a closer look at the company's 3 key rewards

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.