First Hawaiian (FHB) has been removed from the Russell 1000 Dynamic Index, an event that can trigger index fund rebalancing and influence trading flows. This development is independent of the bank’s operations or balance sheet fundamentals.

Despite the index removal, First Hawaiian’s recent momentum has been positive, with a 30 day share price return of 10.53% and a year to date share price return of 17.76%. The 3 year total shareholder return of 85.00% highlights how longer term holders have fared.

If this kind of price action has you thinking about what else is moving, it could be a good time to look at 19 top founder-led companies

After the index exit and the strong recent run in First Hawaiian’s share price, the market price is now only slightly above the average analyst target, yet still at a discount to some intrinsic value estimates. This raises the question of where fair value really sits.

Preferred P/E of 12.9x: Is it justified?

On the numbers, First Hawaiian is trading on a P/E of 12.9x, which sits above several comparison points and suggests the market is paying a premium for its earnings.

The P/E ratio compares the share price to earnings per share, so a higher P/E usually means investors are willing to pay more today for each dollar of earnings. For a bank like First Hawaiian, this often reflects expectations around earnings stability, growth, and the perceived quality of the balance sheet and profit stream.

Here, that 12.9x P/E is described as expensive versus an estimated fair P/E of 11.7x, a peer average of 10.6x, and the wider US Banks industry average of 12.2x. That places First Hawaiian on a clearly richer multiple than similar companies and above where regression based fair value work suggests the ratio could settle if pricing moved closer to fundamentals.

Result: Price-to-Earnings of 12.9x (OVERVALUED)

However, investors in First Hawaiian still face risks, including potential shifts in bank regulation and changes in credit demand that could challenge current sentiment.

Another view on First Hawaiian’s value

While the current 12.9x P/E for First Hawaiian looks full against peers and the fair ratio, the SWS DCF model points in the opposite direction, with the stock at $30.23 compared with an estimated future cash flow value of $36.58. That gap frames the premium P/E as a potential valuation debate rather than a simple red flag. Which signal do you treat as more important?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out First Hawaiian 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 45 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

If this mix of signals around First Hawaiian leaves you unsure, take a closer look at the underlying data now and shape your own view by reviewing the 3 key rewards.

Looking for more investment ideas beyond First Hawaiian?

If First Hawaiian has sharpened your focus on valuation and quality, do not stop here. The next opportunity could be sitting in a corner of the market you have not checked yet.

• Spot potential value opportunities early by reviewing companies highlighted in the 45 high quality undervalued stocks.
• Prioritize resilience and sleep easier at night by assessing stocks identified in the 74 resilient stocks with low risk scores.
• Hunt for lesser known opportunities with solid fundamentals by scanning the screener containing 18 high quality undiscovered gems.

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.