Why Old Second Bancorp’s latest index moves and buyback matter

Old Second Bancorp (OSBC) has drawn fresh attention after being added to multiple Russell growth and small cap benchmark indexes and unveiling a share repurchase program of up to US$61.2 million.

Old Second Bancorp’s recent inclusion in several Russell growth and small cap indexes and the new buyback plan come as the stock trades at US$23.23, with a 30 day share price return of 8.75% and year to date share price return of 19.25%. The 1 year total shareholder return of 23.49% and 5 year total shareholder return of 108.32% point to momentum that has been building over time.

If you are weighing Old Second Bancorp against other opportunities, it can help to see what else is attracting attention through our screener of 20 top founder-led companies

With Old Second Bancorp trading close to analyst price targets and flagged by some models as trading below intrinsic value, the key question is whether the recent gains still leave upside on the table or if the market is already pricing in future growth.

Most Popular Narrative: 10% Overvalued

Old Second Bancorp’s most followed narrative pegs fair value at $23.20, which is slightly below the last close of $23.23, setting up a tight valuation debate.

The recent Evergreen Bank acquisition is performing ahead of expectations, providing higher-than-expected profitability and a more favorable asset mix, which is expected to drive incremental revenue growth, strengthen net interest margin, and enhance ROA as integration is completed.

Want to see what is baked into that fair value for Old Second Bancorp? The narrative leans on measured revenue growth, rising margins and a slimmer share count. The mix of growth, profitability and valuation multiples is doing the heavy lifting in this model.

Result: Fair Value of $23.20 (OVERVALUED)

However, Old Second Bancorp’s heavy focus on Illinois and its exposure to commercial real estate credit trends could quickly challenge that fair value narrative if conditions change.

Another view on Old Second Bancorp’s valuation

The narrative model pegs Old Second Bancorp as about 10% overvalued at $23.20, yet our DCF model points in the opposite direction, with a fair value estimate of $47.83, or around 51% above the current $23.23 share price. Which set of assumptions feels more realistic to you?

To understand how this picture is built from projected cash flows rather than earnings multiples, take a closer look at the SWS DCF model for Old Second Bancorp, including the key inputs and sensitivities, through the Look into how the SWS DCF model arrives at its fair value.

Next Steps

If the mixed signals around Old Second Bancorp have you on the fence, now is the time to review the data and form your own view with the help of 3 key rewards and 2 important warning signs

Looking for more investment ideas beyond Old Second Bancorp?

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• Target potential underpriced opportunities by scanning our list of 43 high quality undervalued stocks that pair quality fundamentals with more modest expectations.
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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.