• Investors may be wondering whether Associated Banc-Corp at US$27.74 still offers value, or if most of the opportunity is already priced in.
• The stock is up 7.7% year to date and 25.5% over the past year. However, it has edged down 0.3% over the last week and 2.3% over the past month, which may hint at shifting views on risk and reward.
• Recent news coverage has focused on Associated Banc-Corp's position within the U.S. regional banking sector and how investors are assessing bank stocks after earlier industry stresses. This helps explain why sentiment has not moved in a straight line. Headlines have tended to weigh up balance sheet resilience and growth prospects as investors reassess which regional banks they want to hold.
• On Simply Wall St's 6 point valuation checklist, Associated Banc-Corp scores a 5 out of 6. The sections that follow look at how that result lines up with different valuation methods, before finishing with a way to judge valuation that many investors overlook.

Approach 1: Associated Banc-Corp Excess Returns Analysis

The Excess Returns model looks at how much profit a company can earn above the return that shareholders require, based on its equity and profitability. For Associated Banc-Corp, the model starts with a Book Value of $29.50 per share and an Average Return on Equity of 10.21%, which are used to estimate a Stable EPS of $3.18 per share. These earnings estimates are based on weighted future Return on Equity projections from 5 analysts.

The Cost of Equity is put at $2.39 per share, which implies an Excess Return of $0.80 per share. In simple terms, the model assumes the company can earn more on its equity base than the required return, and then capitalizes those excess profits over time. A Stable Book Value of $31.19 per share, sourced from weighted future Book Value estimates from 3 analysts, supports this outlook.

Bringing these inputs together, the Excess Returns valuation arrives at an intrinsic value of $50.62 per share, which implies the stock is 45.2% undervalued compared with the current price of $27.74.

Result: UNDERVALUED

Our Excess Returns analysis suggests Associated Banc-Corp is undervalued by 45.2%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.

Approach 2: Associated Banc-Corp Price vs Earnings

The P/E ratio is a common way to value profitable companies because it links what you pay for the stock to the earnings the company is already generating. It also quickly shows how much investors are willing to pay for each dollar of earnings.

What counts as a “normal” P/E depends on what investors expect for earnings growth and how much risk they see. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth expectations or higher risk usually point to a lower P/E.

Associated Banc-Corp currently trades at a P/E of 9.46x. That is below the Banks industry average of 11.59x and also below the broader peer average of 22.81x. Simply Wall St’s Fair Ratio for Associated Banc-Corp is 13.27x. This Fair Ratio is a proprietary estimate of what the P/E might be given the company’s earnings growth profile, industry, profit margins, market capitalization and specific risks.

Compared with simple peer or industry comparisons, the Fair Ratio can give a more tailored view because it adjusts for factors that are unique to Associated Banc-Corp. With the current P/E of 9.46x sitting below the Fair Ratio of 13.27x, the stock appears undervalued on this measure.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Associated Banc-Corp Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Think of a Narrative as your own clear story for Associated Banc-Corp that links what you believe about its future revenue, earnings and margins to a financial forecast and then to a fair value. This is all done through an easy tool on Simply Wall St’s Community page that compares your fair value with the current price, updates automatically when fresh news or earnings arrive, and lets you choose a view that suits you, whether that is closer to the more optimistic US$34.00 outlook built on continued commercial growth and buybacks or the more cautious US$27.00 view that focuses on lending, deposit and regulatory risks.

Do you think there's more to the story for Associated Banc-Corp? 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.