Is Old National Bancorp (ONB) Still Cheap Relative To Fair Value?
Old National Bancorp stock has nearly doubled investors' money over the past five years, yet current valuation work suggests the shares may still trade below an intrinsic value estimate built on the Excess Returns model. This puts recent gains and the pricing signal at odds.
- Around 94.2% total return over five years points to Old National Bancorp having been a strong compounder for long term holders, which naturally raises the question of how much value is already reflected in the price.
- For a regional bank like Old National Bancorp, the path of future profitability and credit quality can support the intrinsic value case, while any pressure on lending margins or a weaker funding profile may weigh on what investors are willing to pay.
- The stock screens as undervalued on both the Excess Returns intrinsic value estimate and earnings multiples, but presents a mixed overall picture, as Old National Bancorp is assessed as attractive on 3 of 6 valuation checks, as shown in the valuation summary.
The issue now is whether Old National Bancorp's current share price of US$26.74 still leaves a reasonable margin between market value and the intrinsic value estimate implied by these models.
Find out why Old National Bancorp's 19.8% return over the last year is lagging behind its peers.
Is Old National Bancorp Still Cheap on Excess Returns?
The Excess Returns model evaluates how much profit Old National Bancorp can generate over its cost of equity capital and then capitalizes those surplus returns. For Old National Bancorp, the inputs indicate a measured profitability profile, with Book Value at $21.43 per share and a Stable Book Value projection of $24.25 per share, both grounded in estimates from 9 analysts.
Stable EPS is set at $2.86 per share against a Cost of Equity of $1.82 per share. This yields an Excess Return of $1.04 per share on an Average Return on Equity of 11.78%. When those excess returns are projected and discounted, the model arrives at an intrinsic value of about $50.50 per share. Compared with the current share price of $26.74, Old National Bancorp screens as roughly 47.0% undervalued under this framework.
On this Excess Returns view, Old National Bancorp stock appears undervalued relative to its modeled ability to earn above its cost of equity.
Our Excess Returns analysis suggests Old National Bancorp is undervalued by 47.0%. Track this in your watchlist or portfolio, or discover 47 more high quality undervalued stocks.
Is Old National Bancorp Still Cheap on Earnings?
The P/E ratio is a straightforward way to see what investors are paying today for each dollar of Old National Bancorp earnings. At around 13.9x, Old National Bancorp trades slightly above the Banks industry average of about 12.3x and the peer average of roughly 12.5x, so the stock carries a modest earnings premium to its sector.
However, the tailored fair P/E ratio for Old National Bancorp is estimated at about 16.3x, which is higher than both the current multiple and the simple industry benchmarks. That gap suggests the current P/E does not fully reflect the earnings profile implied by the company specific inputs used in the fair multiple estimate. Taken together with the intrinsic value work, the P/E view indicates that Old National Bancorp may still be pricing in a discount relative to what investors might be willing to pay based on those earnings characteristics.
On the P/E multiple alone, Old National Bancorp stock appears undervalued relative to the fair earnings multiple implied by its fundamentals and risk profile.
See what the numbers say about this price — find out in our valuation breakdown.
The Old National Bancorp Narrative: What Would Justify Today's Price?
To help explain why Old National Bancorp's valuation models and market price do not fully align, Simply Wall St Narratives outlines specific scenarios for Old National Bancorp's growth, margins and earnings that would need to occur for the stock to be worth materially more or less than it is today. Each narrative links its figures to a clear view of how growth, profitability and risks might change over time, which you can then test against new information on the Community page.
If you have a number driven view on where Old National Bancorp's growth, margins and execution go from here, share a Narrative in the Simply Wall St community and put your case on the record. It is a chance to add your voice and see how your thesis holds up as new data on Old National Bancorp comes through.
Do you think there's more to the story for Old National Bancorp? Head over to our Community to see what others are saying!
The Bottom Line
Old National Bancorp screens as undervalued on both the Excess Returns intrinsic value estimate and the earnings multiple work, although the broader set of checks is mixed rather than uniformly strong. For you, the key question is whether the profitability and risk profile that underpin those models hold up in practice, particularly around lending margins and funding. If they do, the current discount could represent patience being rewarded. If returns on equity or credit quality underwhelm, the gap to intrinsic value may simply reflect a justified caution rather than a clear mispricing.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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