• Wondering whether Live Oak Bancshares at around US$38.03 is offering fair value right now, or if the recent price puts it out of your comfort zone?
• The stock has returned 2.0% over the past week, 0.6% over the last month, 9.6% year to date and 39.0% over the past year, while the 5 year return shows a decline of 32.9%.
• These moves have come as Live Oak Bancshares continues to attract attention in the US regional banking space, with investors watching how its lending focus and digital platform position it against peers. Broader sentiment toward banks has also been shifting, which can affect how quickly investors are willing to reprice stocks like this.
• Simply Wall St currently gives Live Oak Bancshares a valuation score of 3 out of 6. The rest of this article will walk through the standard valuation checks behind that score, then finish with a different way of thinking about value that can help put those numbers into context.

Approach 1: Live Oak Bancshares Excess Returns Analysis

The Excess Returns model looks at how much value a company can create over and above the return that equity investors require. It starts with the book value per share and then assesses whether expected returns on that equity justify a higher or lower price than the current market level.

For Live Oak Bancshares, book value is estimated at $25.55 per share, with a stable book value projection of $29.88 per share, based on future estimates from 3 analysts. Stable EPS is $3.71 per share, sourced from weighted future Return on Equity estimates from 4 analysts, and the average Return on Equity sits at 12.40%.

The model uses a cost of equity of $2.12 per share and an excess return of $1.58 per share to estimate intrinsic value at about $74.21 per share. Compared with the current share price of about $38.03, this approach suggests Live Oak Bancshares stock is trading at a discount of roughly 48.8%.

Result: UNDERVALUED

Our Excess Returns analysis suggests Live Oak Bancshares is undervalued by 48.8%. Track this in your watchlist or portfolio, or discover 45 more high quality undervalued stocks.

Approach 2: Live Oak Bancshares Price vs Earnings

P/E is a common way to look at profitable companies because it directly links what you pay for the stock to the earnings the business is generating today. In general, investors tend to accept higher P/E ratios when they expect stronger earnings growth or see lower risk, and lower P/E ratios when growth expectations are more modest or risks are higher.

Live Oak Bancshares currently trades on a P/E of 14.53x. That sits above the Banks industry average of about 11.50x and also above the peer group average of 13.51x. On the surface, this can suggest the stock is priced more expensively than many other bank stocks.

Simply Wall St also provides a “Fair Ratio” for Live Oak Bancshares of 15.57x. This is a proprietary estimate of what the P/E might be, given factors such as the company’s earnings profile, profit margins, industry, market cap and risk characteristics. Because it incorporates these company specific drivers, it can be more tailored than broad comparisons with the overall industry or selected peers. When comparing the Fair Ratio of 15.57x with the current P/E of 14.53x, the stock screens as slightly undervalued on this measure.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Live Oak Bancshares Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as simple stories you build around the numbers. You connect your view of Live Oak Bancshares to assumptions for future revenue, earnings and margins, then link that forecast to a Fair Value that you can compare with the current share price.

On Simply Wall St, Narratives sit inside the Community page and are designed to be accessible tools. You can quickly see how a company story, a financial forecast and a Fair Value estimate all fit together, and use that to help decide whether the gap between Fair Value and price is wide enough for you to consider buying, trimming or waiting.

Narratives also update as new data such as news, earnings or analyst targets are added, so the story and the valuation do not stay frozen in time while the stock moves.

For Live Oak Bancshares, for example, one investor might align with the more optimistic Fair Value around US$47.00, which is based on assumptions for earnings to reach US$257.8m by about 2029 and a P/E of 10.8x. Another might lean toward a more cautious Fair Value near US$40.00 or even US$33.00 that uses different earnings paths and lower future P/E multiples, and Narratives let you see and compare those views side by side.

Do you think there's more to the story for Live Oak Bancshares? Head over to our Community to see what others are saying!

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.