First Bancorp (FBNC) is back on investors' radar after its latest quarterly earnings, where revenue came in 3.6% above analyst expectations and the stock climbed sharply in a sector with mixed regional bank results.

That upbeat earnings reaction sits on top of a steady 15.2% year to date share price return and a strong 1 year total shareholder return of 45.71%, suggesting momentum is building rather than fading.

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With revenue and net income growing at double digit rates and the stock still trading at a reported 40.08% discount to an intrinsic value estimate, you have to ask: is there still a buying opportunity here, or is the market already pricing in future growth?

Price to Earnings of 20.1x: Is it justified?

On simple earnings terms, First Bancorp does not look cheap, with a P/E of 20.1x compared to both its closest peers at 13.4x and the broader US banks industry at 11.5x.

The P/E ratio compares the share price to the last twelve months of earnings per share and gives you a sense of how much investors are paying for each dollar of profit. For a bank, a higher P/E usually signals that the market is building in stronger earnings potential or preferring its business quality over more discounted options in the sector.

Here, the market is putting a clear premium on First Bancorp. The stock trades at a higher P/E than similar companies and also sits above the estimated fair P/E of 16.3x that our analysis flags as a level the market could potentially move toward over time as expectations reset.

Result: Price-to-Earnings of 20.1x (OVERVALUED)

However, the stock’s premium P/E and concentration in a single US market mean that any earnings setback or local credit shock could quickly challenge today’s momentum.

Another View on Value: Cash Flows Tell a Different Story

While the P/E of 20.1x paints First Bancorp as expensive next to peers and the wider US banks industry, the SWS DCF model points the other way. On that view, the stock at $58.65 sits about 40.1% below an estimated fair value of $97.88. This is a wide gap for you to interpret: is this a cushion or a value trap?

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

The mix of strong recent returns and valuation debate creates a real split in sentiment, so it makes sense to review the full picture now and weigh the trade off between upside and risk using 4 key rewards and 1 important warning sign

Looking for more investment ideas?

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• Target resilient income by reviewing companies in the 10 dividend fortresses that may suit a focus on regular payouts.
• Expand your watchlist with the screener containing 21 high quality undiscovered gems before other investors start paying closer attention.
• Prioritize durability by checking stocks in the 67 resilient stocks with low risk scores that align with a preference for steadier risk profiles.

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.