At the current price of $82, what is the market’s view of UMB Financial’s future operating performance? To achieve average annual stock market performance of 9.0% over the next 6 years, UMB Financial shares will need to reach $137. To achieve Upper quartile performance, UMB Financial’s stock price will need to reach $161 by 2029.
Executive Summary
- UMB Financial’s important characteristics: high expected growth, high profitability, above average financial strength, and stability. A big positive influence on UMB Financial’s valuation is its superior Risk Profile.
- Very high valuation, average shareholder returns. Current valuation levels are very high relative to the UMB Financial Peer Group. Recent market returns have tracked the UMB Financial Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, UMB Financial shares should reach a level of $395 by 2029 — an 31.5% per year total shareholder return. A 2029 stock price of $137 would reflect median performance and a price of $161 would be required to reach upper quartile performance.
- UMB Financial’s historical growth is modestly above average. Historical growth has been high relative to the UMB Financial Peer Group and forecasted growth is relatively very high. Revenue Growth has been superior. This factor has buoyed market perceptions of UMB Financial. UMB Financial’s historical income statement growth and balance sheet growth have diverged. Revenue growth has exceeded asset growth; earnings growth has paralleled equity growth and return on equity has been stable. UMB Financial’s consensus growth expectations are in line with past growth.
- Profitability is only average. The company has high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- Risk Profile has been UMB Financial’s biggest valuation strength. UMB Financial’s risk profile is favorable. Overall variability has been only average with only average revenue variability, above average E.P.S. variability, and relatively low stock price volatility. Financial Strength is relatively high and earnings’ expectations are relatively very high. The debt/capital ratio has been relatively steady.
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