First BanCorp

First BanCorp earns a 3-star quantitative star rating, illustrating our stance that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 8% discount to our quantitative fair value estimate of $29.60 per share; however, caution is warranted due to this estimate's high uncertainty rating. We require the price/fair value ratio to move a certain amount before the star rating can change. This stability-enhancing buffer is in effect for this stock.

The company's profitability strengthens our fair value estimate. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. For example, the firm's earnings yield of 8.3% sits in the top 30% compared with global peers. This suggests that it is generating substantial earnings relative to its share price, which contributes to our view that shares are undervalued.

Conversely, the company's valuation metrics are potentially concerning. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. The firm's enterprise value to market value ratio of 0.9, for example, lies in the bottom 30% globally. The market value of equity makes up a large fraction of enterprise value, indicating that shares have sharply risen, or that the company has a "lazy" balance sheet that is underleveraged. Despite our favorable price/fair value ratio, this characteristic is a negative attribute.

The narrow moat rating for this company indicates investors can expect it to generate 10 years or more of excess returns on capital due to its respectable competitive advantages. Its moat is bolstered by its strong financial health, which indicates low near-term bankruptcy risk.