• Investors may be wondering whether S&T Bancorp stock at around US$44.86 still offers value, or if most of the easy gains are already on the table.
• The stock has returned 3.6% over the past week, 3.8% over the last 30 days, 14.3% year to date, 27.3% over 1 year, 81.7% over 3 years, and 59.7% over 5 years, which raises fair questions about what is already priced in.
• Recent coverage has focused on S&T Bancorp's position within the U.S. regional banking sector and on how investors are assessing bank balance sheet strength and capital returns. This backdrop helps explain why the stock's multiyear returns appear strong compared with many regional peers that have faced pressure at different times.
• S&T Bancorp currently has a valuation score of 3 out of 6. The rest of this article will walk through what that means using several valuation methods, and will finish with a broader way to think about the stock's value beyond the usual ratios.

Approach 1: S&T Bancorp Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to earn above the return that shareholders require, then links that stream of "excess" profit back to today’s share price.

For S&T Bancorp, the key building blocks are its capital base and the earnings it can generate on that capital. Book Value is $39.46 per share, with a Stable Book Value estimate of $42.35 per share, based on weighted future Book Value estimates from 6 analysts. Stable EPS is $3.93 per share, sourced from weighted future Return on Equity estimates from the same 6 analysts, which implies an Average Return on Equity of 9.27%.

The model uses a Cost of Equity of $3.01 per share. The difference between Stable EPS and this cost is the Excess Return, at $0.92 per share. Aggregating these excess returns over time produces an estimated intrinsic value of $68.05 per share.

Compared with the recent share price of about $44.86, this Excess Returns output suggests the stock is 34.1% undervalued.

Result: UNDERVALUED

Our Excess Returns analysis suggests S&T Bancorp is undervalued by 34.1%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Approach 2: S&T Bancorp Price vs Earnings

The P/E ratio is a useful way to value a profitable company because it links what you pay for each share to the earnings that support that share. In general, higher growth expectations or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually point to a lower, more cautious multiple.

S&T Bancorp currently trades on a P/E of 11.88x. This sits close to the Banks industry average of 11.46x and is below the broader peer group average of 23.43x, so on simple comparisons the stock is not priced at a premium to its sector. However, those basic comparisons do not fully reflect S&T Bancorp specific growth outlook, profitability, size or risk profile.

Simply Wall St’s Fair Ratio for S&T Bancorp is 10.15x, which is a proprietary estimate of what the P/E might be based on factors such as earnings growth, profit margins, industry, market capitalization and risk. Because it incorporates these company specific drivers, the Fair Ratio can be a more tailored yardstick than broad industry or peer averages. With the current P/E modestly above the Fair Ratio, the stock screens as slightly overvalued on this metric.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your S&T Bancorp Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives are introduced here as a simple story you create about S&T Bancorp that ties your view on its risks, opportunities, future revenue, earnings and margins to a financial forecast and then to a Fair Value that you can compare with the current price to decide whether the stock looks appealing or not.

On Simply Wall St, within the Community page used by millions of investors, Narratives are an accessible tool that let you set your own assumptions, see how that translates into a Fair Value, and then watch that view update automatically when fresh news, earnings or guidance is released.

For S&T Bancorp, one investor might build a cautious Narrative that leans heavily on the risks around fintech competition, geographic concentration and regulation. This could lead to a Fair Value close to the consensus US$45.67. Another investor might emphasize disciplined risk management, steady loan and deposit trends and regional growth, which could justify a higher Fair Value and a different stance when comparing that estimate with today’s share price.

Do you think there's more to the story for S&T Bancorp? 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.