First National Bancorp: Discounted Multiple, Comparable Growth, Higher Yield

FNB Corp (NYSE: FNB) has seriously underperformed its peer group over the last five years, and much of this lag has occurred since July 2016. This leaves the stock at the cheaper end of the P/E spectrum while promising comparable growth in EPS.
In the chart below, FNB is the white line, the KRE regional banks index the magenta line. The underperformance of FNB is now in the order of 30% since July 2016, the period shown in the chart.

Source: Bloomberg
Investors should consider long positions in FNB. The prospective EPS growth envisaged by the sell side consensus is attractive and, as we shall see in this article, realistic. If the stock can maintain its current year P/E ratio, it will provide attractive total returns from here. There is additional upside if the stock can re-rate.
First, let's check in on the consensus P/E ratios for 2017-2019, the EPS growth the market expects, and the yield. The sample stocks in the comparison are from FNB's most recent investor presentation. This is FNB's peer group in its own eyes.

So FNB comes in materially cheaper than peers and with a markedly better yield. Anticipated growth is modestly better than the mean value and the same as the median value.
This initial screen should put the stock on the radar. If FNB can trade at 15.3x EPS out in 2019, investors would enjoy 23.5% price appreciation and nearly 7% of dividends over this two year time frame. That is a competitive two-year return profile.... Read more

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