Washington Trust Bancorp

Washington Trust Bancorp Inc receives a 3-star quantitative star rating, indicating our belief that this share class is a balanced choice, but prudent investors should consider looking elsewhere. The stock currently trades at a 12% discount to our quantitative fair value estimate of $42.71 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 firm's valuation metrics strengthen our estimated fair value. 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 75.5% sits in the top 40% 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 5.8%, for example, lies in the top 10% 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.

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.