Why Provident Financial Services Is On Investors’ Radar

Provident Financial Services (PFS) has drawn attention after a strong run in its shares over the past 3 months, putting its recent performance and underlying banking business in sharper focus for investors.

With the stock also showing a solid move over the past month, many investors are taking a closer look at how its current valuation lines up against its financial profile, including revenue of $866.82 and net income of $291.16.

At a share price of US$22.96, Provident Financial Services has recently delivered a 30-day share price return of 13.95% and a 90-day share price return of 29.21%. Its 1-year total shareholder return of 29.35% and 5-year total shareholder return of 49.18% suggest momentum has been building over both shorter and longer periods as investors reassess its risk and growth profile.

If this bank’s recent run has caught your eye and you want to see what else is moving, now could be a good moment to look at 23 top founder-led companies as another source of ideas.

With the shares up strongly over the past 3 and 12 months and trading at US$22.96, the key question now is whether Provident Financial Services still trades at a discount to its fundamentals or if the market is already pricing in future growth.

Most Popular Narrative: 8.2% Undervalued

Provident Financial Services' most followed narrative puts fair value at $25, slightly above the current $22.96 share price, which has investors weighing what is built into those assumptions.

The company's active investments in digital banking and data analytics are leading to efficiency improvements (as seen in the lower efficiency ratio). This takes advantage of accelerating customer migration toward online and mobile banking and is likely to boost net margins and fee income over the medium to long term.

Curious how this efficiency story ties into revenue growth, margins and the earnings multiple behind that $25 fair value mark? The full narrative spells out the earnings path, the assumed profitability shift and the valuation multiple investors are using as the anchor. The details might surprise you.

Result: Fair Value of $25 (UNDERVALUED)

However, this hinges on deposit competition staying manageable and digital upgrades keeping pace, as higher funding costs or slower tech execution could quickly challenge that fair value story.

Build Your Own Provident Financial Services Narrative

If you see the numbers differently or prefer to test your own assumptions, you can build a custom view of Provident in just a few minutes, starting with Do it your way.

A good starting point is our analysis highlighting 5 key rewards investors are optimistic about regarding Provident Financial Services.

Looking for more investment ideas?

If Provident Financial Services has sparked your interest, do not stop here. Cast a wider net so you are not relying on just one opportunity.

• Target value by comparing quality and price using our 53 high quality undervalued stocks that focuses on companies with solid fundamentals trading below their assessed worth.
• Prioritize resilience with the 84 resilient stocks with low risk scores to see businesses that score well on stability and financial risk checks.
• Hunt for fresh opportunities via our screener containing 23 high quality undiscovered gems that highlights lesser known companies with strong underlying numbers.

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.