Valuation Scorecard: Stock Rating A-Highest (3/6/24)-Customers Bancorp Inc (CUBI).

Over the next 6 years, Customers Bancorp shares will need to reach $92 to achieve average annual stock market performance of 9.0%. Customers Bancorp’s stock price will need to reach $108 by 2029 to achieve upper quartile performance. What is the market’s view of Customers Bancorp’s future operating performance as reflected in the current price of $55?

Executive Summary

• Key Customers Bancorp characteristics: very high profitability, above average expected growth, below average financial strength, and low stability. A big positive influence on Customers Bancorp’s valuation is its superior Growth.
• Very high valuation, leading shareholder returns. Current valuation levels are very high relative to the Customers Bancorp Peer Group. Recent market returns have significantly outperformed the Customers Bancorp Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, Customers Bancorp shares should reach a level of $277 by 2029 — an 31.0% per year total shareholder return. A 2029 stock price of $92 would reflect median performance and a price of $108 would be required to reach upper quartile performance.
• Growth has been Customers Bancorp’s biggest valuation strength. Historical growth has been very high relative to the Customers Bancorp Peer Group and forecasted growth is relatively high. Revenue Growth, Equity Growth, and EPS Growth have been superior. These factors have buoyed market perceptions of Customers Bancorp. Customers Bancorp’s historical income statement growth and balance sheet growth have diverged. Revenue growth has exceeded asset growth; earnings growth has fallen short of equity growth driving erosion in return on equity.
• Pretax ROA, Return on Equity, and Asset Turnover are group leading. These factors have strengthened market perceptions of Customers Bancorp. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
• Customers Bancorp’s risk profile is neutral. Overall variability has been above average with above average revenue variability, very high E.P.S. variability, Financial Strength is below average and earnings’ expectations are relatively very high. The debt/capital ratio has declined very significantly.

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