Northwest Bancshares

Northwest Bancshares Inc receives 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 10% discount to our quantitative fair value estimate of $16.77 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 86.7%, which sits in the top 40% 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 undervalued.

The firm's favorable dividend structure is an additional encouraging factor. Dividends represent a stable form of future cash flows returned to shareholders, reducing the perceived risk of a business. The firm's forward dividend yield of 5.3%, for example, ranks in the top 20% compared with peers globally. Expected dividend payments over the coming year relative to the current share price are favorable, which further promotes our favorable price/fair value ratio.

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.

With its quantitative economic moat rating of none, we do not expect this company to materially outearn its cost of capital in the long run. However, its financial health score is strong, suggesting that the company should be well positioned to weather tough times.