Horizon Bancorp (IN)

Horizon Bancorp (IN) earns a 3-star quantitative star rating, reflecting our opinion that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 11% discount to our quantitative fair value estimate of $21.62 per share; however, caution is warranted due to this estimate's high uncertainty rating.

The company's valuation metrics increase our fair value estimate. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. Reflecting the firm's valuation is its book value yield of 72.6%, which sits in the top 45% compared with peers globally. The market price is low relative to the book (accounting) value of the company's equity, which contributes to our view that shares are cheap.

Alternatively, the firm's liquidity is potentially concerning. Excessive liquidity may suggest inefficient capital use or limited investment opportunities. The firm's median trading volume over the past 60 days, a core component of liquidity, falls in the top 40% globally. High trading volumes could indicate a sharp change in business model or a new growth trajectory of the business. Despite our favorable price/fair value ratio, this characteristic is a negative attribute.

In addition to the aforementioned drivers, our model considers momentum as part of its comprehensive analysis. This share class has outperformed the broader universe over the past year. While we believe the stock is undervalued, this outperformance had a negative impact on our valuation estimate.

The company's quantitative economic moat rating of none suggests any excess returns could erode quickly as competition arrives. However, its financial health score is strong, suggesting that the company should be well positioned to weather tough times.