First Financial Bankshares (FFIN) recently increased its equity buyback authorization by 2,200,000 shares to a total of 7,200,000 and extended the program through July 31, 2027, drawing fresh attention to the stock.

The buyback announcement comes after a period where First Financial Bankshares’ share price has gained 15.92% year to date and 11.15% over 90 days, while its 1 year total shareholder return is 1.77% and the 5 year total shareholder return shows a decline of 20.46%. At the latest share price of US$34.80, this renewed repurchase capacity may be interpreted as management signaling confidence, which some investors could view as support for the recent share price momentum.

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After a 15.92% gain this year and a larger buyback on the table, investors in First Financial Bankshares now face a simple test. Is most of the upside already reflected in US$34.80, or is there still value on offer?

Price-to-Earnings of 18.4x: Is it justified?

On the numbers provided, First Financial Bankshares trades on a P/E of 18.4x, which points to a richer valuation than many US bank peers at the latest close of $34.80.

The P/E multiple compares the current share price to earnings per share and is a quick way to see how much investors are paying for each dollar of earnings. For a bank like First Financial Bankshares, it often reflects expectations around earnings growth, balance sheet quality and consistency of returns.

Here, the picture is mixed. First Financial Bankshares is described as good value when compared with its direct peer group average P/E of 21.7x. However, it looks expensive versus the wider US Banks industry at 11.9x and also relative to an estimated fair P/E of 13.1x. That suggests the current multiple sits above a level the market could move toward if expectations moderate.

Result: Price-to-Earnings of 18.4x (OVERVALUED).

However, the current P/E of 18.4x still sits above both the wider US bank industry and an estimated fair P/E, so sentiment toward First Financial Bankshares could shift quickly.

Another View on First Financial Bankshares' Valuation

The picture shifts when you look at First Financial Bankshares through the SWS DCF model. On this approach, the stock at $34.80 trades about 24.8% below an estimated future cash flow value of $46.25. That points to an undervalued result rather than an expensive one.

For investors weighing which lens to trust, this gap between an 18.4x P/E that screens as expensive versus a DCF output that screens as cheap raises a simple question: Which set of assumptions feels more realistic to you for First Financial Bankshares?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out First Financial Bankshares 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 49 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

This mix of signals around First Financial Bankshares can feel split, so it is worth taking a close look at the underlying data and acting promptly to shape your own view. To see what the market seems optimistic about, start with the 4 key rewards

Looking for more investment ideas beyond First Financial Bankshares?

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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.