• Many investors may be considering whether First Interstate BancSystem is still attractively priced after its recent share price performance, or if most of the value is already reflected in the current price.
• The stock last closed at US$35.72, with returns of 0.3% over the past week, a slight decline of 0.5% over the past month, 1.2% year to date, and 38.9% over the past year, alongside a 71.6% return over three years and 4.5% over five years.
• Recent coverage has focused on how regional banks are adjusting to changing interest rate expectations and tighter funding conditions. This has put more attention on balance sheet strength and deposit stability. In this context, investors have been reassessing how much they are willing to pay for banks with a regional footprint like First Interstate BancSystem.
• Simply Wall St's valuation checks give First Interstate BancSystem a score of 3 out of 6. The rest of this article will break down what that means across different valuation approaches and will also point to an even more complete way to think about value at the end.

Approach 1: First Interstate BancSystem Excess Returns Analysis

The Excess Returns model looks at how much profit a bank can earn on its equity above the return that shareholders require, then capitalises those “excess” profits into an intrinsic value per share.

For First Interstate BancSystem, book value is estimated at $34.47 per share, with a stable book value of $35.77 per share, both based on weighted future estimates from 5 analysts. Stable EPS is $2.85 per share, while the implied cost of equity is $2.54 per share. That leaves an excess return of $0.31 per share, supported by an average return on equity of 7.97%.

By projecting these excess returns and discounting them, the model arrives at an intrinsic value of $44.44 per share. Compared to the recent share price of $35.72, this implies the stock is 19.6% undervalued using this approach.

This is a reasonably large gap, suggesting the market may be putting a lower value on future profitability than this model indicates.

Result: UNDERVALUED

Our Excess Returns analysis suggests First Interstate BancSystem is undervalued by 19.6%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.

Approach 2: First Interstate BancSystem Price vs Earnings

For a profitable bank, the P/E ratio is a useful yardstick because it compares what you are paying today with the earnings the company is already generating. The level of P/E investors are willing to pay usually reflects what they expect for future growth and how much risk they see in those earnings, so higher growth or lower perceived risk can support a higher “normal” P/E and the opposite can justify a lower one.

First Interstate BancSystem currently trades on a P/E of 11.12x. This sits slightly below the Banks industry average of 11.59x and somewhat above the peer group average of 10.26x, so on simple comparisons the stock is neither an obvious outlier nor an extreme bargain.

Simply Wall St’s Fair Ratio for First Interstate BancSystem is 14.92x. This is a proprietary estimate of what the P/E might be based on factors such as earnings growth, profit margins, industry, market cap and key risks. Because it blends these company specific drivers, it gives a more tailored reference point than broad peer or industry averages. With the Fair Ratio above the current 11.12x P/E, the stock screens as undervalued on this multiple based approach.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your First Interstate BancSystem Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St let you attach a clear story about First Interstate BancSystem to the numbers by linking your view of its future revenue, earnings and margins to a forecast, and then to a Fair Value that you can compare with the current price. Each Narrative is hosted on the Community page and automatically refreshed as new news or earnings arrive. This is why one investor might build a more optimistic Narrative around a Fair Value of US$41.00 based on higher earnings potential, while another might anchor on a more cautious Fair Value of US$33.00. You can see both side by side and decide which story best fits your own expectations before making any buy or sell decisions.

For First Interstate BancSystem however we will make it really easy for you with previews of two leading First Interstate BancSystem Narratives:

Start with the upside case if you think the current market is not fully reflecting the company’s potential, then compare it with a more cautious view that leans on lower valuation multiples and softer profitability assumptions.

Fair value in this Narrative: US$37.25 per share

Gap to this fair value: around 4.1% below the Narrative fair value

Revenue growth assumption: 60%

• Analysts in this camp expect profit margins to widen from 30.0% to 41.7%, with earnings rising to US$441.0m and EPS of US$3.15 by around May 2029.
• The story leans on strong capital and liquidity, a large low cost deposit base in faster growing regions, and flexibility to use buybacks, organic investment, or M&A to support shareholder returns.
• Key watchpoints include flat near term revenue assumptions, higher criticized loans, concentration in core markets, and the risk that cost cuts or branch optimization reduce competitiveness over time.

Fair value in this Narrative: US$33.00 per share

Gap to this fair value: around 8.2% above the Narrative fair value

Revenue growth assumption: 79%

• This view assumes profit margins compress from 30.0% to 27.8%, with earnings at about US$296.1m and EPS of US$3.20 by May 2029, and a higher P/E of 11.3x needed to support that fair value.
• It focuses on branch exits, intentional loan portfolio shrinkage, softer loan demand and criticized commercial real estate exposures as potential headwinds for revenue, margins, and credit costs.
• Offsetting factors include solid capital levels, a focus on organic growth and relationship banking, and efforts to manage expenses, which together could still support earnings if execution matches these assumptions.

If you want to go beyond the summaries and see the full assumptions, risks, and valuation math that other investors are using, To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for First Interstate BancSystem on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

Do you think there's more to the story for First Interstate BancSystem? 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.