Exchange offer puts HBT Financial’s capital structure in focus

HBT Financial (HBT) has launched a fixed income exchange offer for US$85 million of callable, subordinated, unsecured, variable rate notes due March 15, 2036. This move points directly at its funding mix.

HBT Financial’s announcement comes after a steady period, with the stock at US$27.76 and a year to date share price return of 8%, while the 1 year total shareholder return is 23%, hinting that momentum has been building rather than fading.

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With the stock posting solid multi year returns and trading about 15% below analyst targets, along with an indicated intrinsic discount, the key question is whether HBT Financial is still undervalued or if the market already reflects its future growth.

Preferred P/E of 14.6x: Is it justified?

On simple headline numbers, HBT Financial trades on a P/E of 14.6x, which prices its $27.76 share price above many US bank peers.

The P/E ratio compares the current share price to earnings per share and is often used for banks, where earnings power is a key focus for investors. A higher P/E can signal that the market is willing to pay more for each dollar of earnings, often when it expects those earnings to hold up or improve.

Here, HBT Financial looks expensive relative to both the US Banks industry average P/E of 11.5x and a peer average of 11.3x. This suggests investors are currently assigning a premium to its earnings. At the same time, the ratio is close to its estimated Fair P/E of 15.1x. This implies that some of this premium lines up with where the market could potentially settle if that fair multiple is reached.

Result: Price-to-Earnings of 14.6x (OVERVALUED)

However, investors still need to watch for pressure on earnings that could challenge a 14.6x P/E and any shift in funding costs from the new subordinated notes.

Another view on value: DCF points the other way

That 14.6x P/E suggests HBT Financial trades at a premium to US bank peers, but the SWS DCF model tells a different story. With an estimated future cash flow value of $66.21 per share versus the current $27.76 price, the stock screens as deeply undervalued. Could the earnings multiple be missing part of the picture?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out HBT Financial 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 46 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

Given the mixed signals around valuation and sentiment, this is a moment to check the numbers yourself, weigh the upside and downside, and see how HBT Financial really looks to you by reviewing its 2 key rewards and 2 important warning signs

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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.