• If you are wondering whether 1st Source at a last close of US$74.65 still offers value, the key question is how its current price lines up with what you are actually getting for that money.
• The stock has delivered returns of 1.5% over the past week, 1.4% over the past month, 19.5% year to date, 27.7% over 1 year, 72.8% over 3 years and 73.1% over 5 years, which naturally raises questions about how much of the story is already reflected in the share price.
• Recent coverage around regional banks, funding conditions and credit quality has kept the sector under the spotlight, and 1st Source has been part of that broader conversation. This context helps explain why investors are paying closer attention to valuation, balance sheet strength and long term returns rather than only short term news flow.
• On Simply Wall St’s valuation framework, 1st Source has a value score of 4 out of 6, which sets up a closer look at how different methods such as discounted cash flow, P/E and asset based valuation compare, and points to an even more rounded way of thinking about value that will be covered at the end of this article.

Approach 1: 1st Source Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to generate above the return required by shareholders, then capitalises those extra profits into an estimated value per share.

For 1st Source, the starting point is its book value of US$53.54 per share and a stable earnings per share estimate of US$6.55, based on the median return on equity from the past 5 years. The model applies a cost of equity of US$4.22 per share, which leaves an excess return of US$2.33 per share. That excess is tied to an average return on equity of 11.03% and a stable book value assumption of US$59.38 per share, sourced from weighted future book value estimates by three analysts.

Putting these inputs together, the Excess Returns framework produces an intrinsic value estimate of about US$124.61 per share. Compared with the recent share price of US$74.65, this implies the stock is around 40.1% undervalued according to this model.

Result: UNDERVALUED

Our Excess Returns analysis suggests 1st Source is undervalued by 40.1%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.

Approach 2: 1st Source Price vs Earnings

For a profitable bank like 1st Source, the P/E ratio is a useful yardstick because it links what you pay per share to the earnings the company is currently generating. Investors usually look for a P/E that lines up with their views on the company’s potential and risk. A higher perceived potential or lower risk profile can justify paying a higher multiple, while lower perceived potential or higher risk typically calls for a lower one.

1st Source is trading on a P/E of 11.28x, compared with the Banks industry average of 11.59x and a peer group average of 13.49x. Simply Wall St’s Fair Ratio for 1st Source is 10.41x. This Fair Ratio is a proprietary estimate of what the P/E might be given factors such as the company’s earnings profile, profit margin, risk, market cap and its industry. It is intended to be more tailored than a simple comparison with peers or the sector.

Since the current P/E of 11.28x is above the Fair Ratio of 10.41x by a meaningful margin, the multiple-based view points to the stock trading on the expensive side.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your 1st Source Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives bring that to life by letting you attach a clear story about 1st Source to your numbers, including your assumed fair value and your expectations for future revenue, earnings and margins.

A Narrative connects three things in one place: the company story you believe, the financial forecast that story implies, and the fair value that follows from those assumptions, so you can see how your view translates into a price.

On Simply Wall St, Narratives sit inside the Community page, where many investors use them as a simple tool to compare their own fair value to the current share price and decide whether the stock appears attractive or stretched on their terms.

Because Narratives update automatically when new information such as fresh earnings, regulatory filings or major news appears, your story and valuation stay aligned with the latest data instead of becoming outdated.

For 1st Source, one investor might set a higher fair value based on a more optimistic view of long-term profitability, while another might choose a lower fair value based on more cautious assumptions about growth and risk.

Do you think there's more to the story for 1st Source? 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.