• If you are looking at Valley National Bancorp stock and wondering whether the current price really reflects what you are getting, the valuation story is where things start to get interesting.
• The stock last closed at US$14.20, with returns of 0.6% over 7 days, 9.8% over 30 days, 21.5% year to date, 74.9% over 1 year, 100.1% over 3 years and 31.3% over 5 years, which gives plenty of context before comparing price to underlying value.
• Recent headlines have focused on Valley National Bancorp's positioning within the US regional banking sector and its exposure to interest rate trends, which helps explain some of the recent trading interest. Investors have also been watching broader regulatory and funding developments for banks, adding another layer to how the stock is being assessed.
• On Simply Wall St's 6 point valuation checklist, Valley National Bancorp scores 4, which indicates it screens as undervalued on four of the six checks. The rest of this article will compare different valuation approaches and then provide a way to think about value that goes beyond the numbers alone.

Approach 1: Valley National Bancorp Excess Returns Analysis

The Excess Returns model looks at whether Valley National Bancorp stock is creating value above the compensation investors require for owning its equity. Instead of focusing on raw earnings, it compares the return generated on shareholder funds with the cost of that equity.

For Valley National Bancorp, the model uses a Book Value of $13.48 per share and a Stable EPS of $1.51 per share, based on weighted future Return on Equity estimates from 9 analysts. The Average Return on Equity is 10.15%, while the Cost of Equity is $1.06 per share. That leads to an estimated Excess Return of $0.45 per share, which is the value created after covering the equity cost.

The analysis also assumes a Stable Book Value of $14.88 per share, again based on analyst estimates, to project how these excess returns could build over time. Putting this together, the Excess Returns model arrives at an estimated intrinsic value of about $27.57 per share. Compared with the recent share price of $14.20, this implies an intrinsic discount of 48.5%, which screens Valley National Bancorp as significantly undervalued on this approach.

Result: UNDERVALUED

Our Excess Returns analysis suggests Valley National Bancorp is undervalued by 48.5%. Track this in your watchlist or portfolio, or discover 44 more high quality undervalued stocks.

Approach 2: Valley National Bancorp Price vs Earnings

For a profitable company like Valley National Bancorp, the P/E ratio is a practical way to think about what you are paying for each dollar of earnings. It links directly to how the stock is priced today relative to the earnings that the business is currently generating.

In general, higher growth expectations or lower perceived risk can support a higher P/E ratio, while slower expected growth or higher risk usually points to a lower “normal” or “fair” P/E. With Valley National Bancorp trading on a P/E of 12.56x, the stock sits above the Banks industry average of 11.81x, but below the peer group average of 14.34x.

Simply Wall St’s Fair Ratio for Valley National Bancorp is 14.15x. This is a proprietary estimate of what the P/E might reasonably be, given factors such as the company’s earnings profile, its industry, profit margins, market cap and risk characteristics. Because it incorporates these company specific inputs, the Fair Ratio can give a more tailored view than a simple comparison with peers or the industry. With the current P/E of 12.56x below the Fair Ratio of 14.15x, Valley National Bancorp screens as undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your Valley National Bancorp Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St help you turn your view of Valley National Bancorp into a clear story that links your expectations for future revenue, earnings and margins to a financial forecast, a fair value and then a comparison with today’s share price. All of this is available within an easy Community page tool used by millions, where Narratives update as new news or earnings arrive and different investors can hold very different but transparent views. For example, one Narrative might lean closer to the bullish US$17.00 analyst fair value, while another anchors near the cautious US$14.00 view, giving you a structured way to decide whether Valley National Bancorp stock looks attractive, fairly priced or expensive against your own assumptions.

Do you think there's more to the story for Valley National 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.