Is Tompkins Financial (TMP) Cheap Following Strong Q2 Results And A Dividend Increase?

Tompkins Financial (TMP) has drawn fresh attention after reporting higher second quarter net interest income and net income, along with a larger quarterly dividend, prompting investors to reassess the stock’s current valuation and income profile.

See our latest analysis for Tompkins Financial.

The latest earnings, dividend increase and recent share repurchases sit against a strong share price run. Tompkins Financial’s share price return of 16.5% over 90 days and 37.5% year to date, together with a 1 year total shareholder return of 50.3%, suggests firm positive momentum.

If you are taking a closer look at banks and other financials, it can also help to widen the search and review the 18 top founder-led companies

After a 50.3% 1-year total return and stronger recent results from Tompkins Financial, the share price already reflects a lot of optimism. The next step is to see whether the current valuation still offers enough potential to justify the risk.

Preferred P/E of 8.1x: Is it justified?

With Tompkins Financial last closing at $99.68, the stock trades on a P/E of 8.1x, which screens as inexpensive relative to both peers and the broader US banks industry.

The P/E ratio compares the share price with earnings per share, so it gives you a quick read on how much investors are paying for each dollar of current earnings. For a bank like Tompkins Financial that reports established earnings and pays a regular dividend, P/E is a common yardstick investors use when they want a quick sense of how the market is pricing those earnings.

On one hand, Tompkins Financial is described as expensive versus its estimated fair P/E of 7.1x, which suggests the current multiple sits above a level the market could move toward over time. On the other hand, that same 8.1x is framed as good value compared with a peer average of 13.4x and a US banks industry average of 11.9x, which points to a sizeable discount relative to many comparable stocks.

This mix of signals creates a split picture. Against similar companies, the 8.1x P/E is materially lower, yet against the fair ratio, there is some premium that investors would need to weigh against the company’s earnings quality, growth track record and forecasts for earnings and revenue to decline over the next three years.

Explore the SWS fair ratio for Tompkins Financial.

Result: Price-to-Earnings of 8.1x (UNDERVALUED)

However, Tompkins Financial also faces risks, such as annual revenue and net income declines, and a recent share price that trades slightly above the analyst target.

Find out about the key risks to this Tompkins Financial narrative.

Another view on Tompkins Financial’s value

While the 8.1x P/E for Tompkins Financial looks low against peers, the SWS DCF model points in the same direction, with the stock trading at $99.68 compared with an estimated future cash flow value of $128.40, or about 22% below that figure. Which signal matters more for your process?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Tompkins Financial for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 51 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With Tompkins Financial showing both appealing valuation signals and some clear question marks, it makes sense to review the numbers yourself and decide what really stands out for you. To weigh the trade off between the concerns and the potential upside in a structured way, take a closer look at the 3 key rewards and 1 important warning sign.

Looking for more investment ideas beyond Tompkins Financial?

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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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