Valley National Bancorp

Valley National Bancorp is assigned 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 11% discount to our quantitative fair value estimate of $14.39 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 valuation metrics bolster our fair value estimate. A company's valuation metrics provide insights into the market's expectations for its future growth and profitability. For example, the firm's book value yield of 106.7% lies in the top 30% compared with global peers. 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 profitability is an additional encouraging factor. Highly profitable companies are often more resilient in recessions and are likely to generate stronger future cash flows for shareholders. The firm's earnings yield of 9.2%, for example, falls in the top 30% compared with global peers. This suggests that it is generating substantial earnings relative to its share price, 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.

The company's quantitative economic moat rating of none suggests any excess returns could erode quickly as competition arrives. Additionally, the firm's moderate financial health score suggests it is acceptably positioned against adverse economic circumstances.