Valuation Scorecard: Stock Rating B-Positive (5/6/24)-Chemung Financial Corp (CHMG).

To achieve average annual stock market performance of 9.0% over the next 6 years, Chemung Financial shares will need to reach $73. To achieve Upper quartile performance, Chemung Financial’s stock price will need to reach $86 by 2029. At the current price of $43, what is the market’s view of Chemung Financial’s future operating performance?

Executive Summary

• Key Chemung Financial characteristics: high financial strength, high expected growth, very high profitability, and high stability. A big positive influence on Chemung Financial’s valuation is its superior Risk Profile.
• High valuation, average shareholder returns. Current valuation levels are high relative to the Chemung Financial Peer Group. Recent market returns have tracked the Chemung Financial Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Chemung Financial shares should reach a level of $119 by 2029 — an 20.7% per year total shareholder return. A 2029 stock price of $73 would reflect median performance and a price of $86 would be required to reach upper quartile performance.
• Chemung Financial’s achieved growth is average. Historical growth has been average relative to the Chemung Financial Peer Group and forecasted growth is relatively very high. Equity Growth has lagged. This factor has negatively affected market perceptions of Chemung Financial. Chemung 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.
• Return on Equity, and Pretax Margin are group leading. These factors have strengthened market perceptions of Chemung Financial. 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 Chemung Financial’s biggest valuation strength. Chemung Financial’s risk profile is very favorable. Overall variability has been very low with very low revenue variability, relatively low E.P.S. variability, and very low stock price volatility. Financial Strength is relatively very high and earnings’ expectations are relatively high. The debt/capital ratio has risen very significantly.

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