Management succession move puts leadership in focus

First Financial Bankshares (FFIN) recently announced a series of executive promotions at its First Financial Bank subsidiary, as part of a broader management succession plan that highlights leadership development, regional responsibilities, and continuity for shareholders.

The succession announcements arrive after a period where the share price has shown steady positive momentum in the short term, with a 7 day share price return of 3.07% and a year to date share price return of 8.39%. However, the 1 year total shareholder return of 10.16% and 5 year total shareholder return of 12.26% point to a weaker longer term picture.

If management changes at a regional bank have caught your attention, it could be a good moment to broaden your search and check out fast growing stocks with high insider ownership.

With the share price up in the short term but longer term returns weaker and the stock trading below one estimate of intrinsic value, is First Financial Bankshares now quietly undervalued, or is the market already pricing in future growth potential?

Price-to-Earnings of 19.1x: Is it justified?

On earnings, First Financial Bankshares trades on a P/E of 19.1x at a last close of US$32.54, which sits well above both peers and an estimated fair level for the company.

The P/E ratio compares the current share price to earnings per share. A higher figure usually reflects higher expectations for future earnings or a perceived quality premium. For a regional bank, this often signals what investors are willing to pay for its profit stream, given its business mix, profitability and perceived resilience.

In this case, First Financial Bankshares is described as trading at 24.5% below one estimate of fair value, yet its 19.1x P/E is higher than the peer average of 12.7x and above the US Banks industry average of 12x. That indicates the market is still assigning a richer earnings multiple than many peers. The SWS fair ratio framework points to an estimated fair P/E of 12.6x that the market could move closer to if sentiment changes or earnings trends shift.

Result: Price-to-Earnings of 19.1x (OVERVALUED)

However, you still need to weigh risks such as weaker 1 year and 5 year total returns, as well as any shift in investor sentiment toward premium bank valuations.

Another view: DCF points in a different direction

While the 19.1x P/E makes First Financial Bankshares look expensive next to peers, our DCF model suggests a different story. It indicates an estimated fair value of US$43.10 compared with the current US$32.54. That 24.5% discount raises a simple question: are earnings multiples telling the whole story here?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out First Financial Bankshares 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 863 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own First Financial Bankshares Narrative

If you see the numbers differently or simply want to test your own view against the data, you can build a full narrative in just a few minutes, starting with Do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding First Financial Bankshares.

Looking for more investment ideas?

If First Financial Bankshares has sparked your interest, do not stop here. Broaden your watchlist with other clear ideas that could fit different roles in your portfolio.

• Target potential mispricing by checking out these 863 undervalued stocks based on cash flows that may offer earnings power at prices some investors might overlook.
• Capture growth themes by scanning these 24 AI penny stocks positioned around artificial intelligence trends and related technologies.
• Strengthen your income focus by reviewing these 12 dividend stocks with yields > 3% that currently offer yields above 3%.

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.