Is Hilltop Holdings (HTH) Undervalued Or Is Its Higher P/E Already Priced In?
Hilltop Holdings (HTH) is back in focus after recent share price pressure, with the stock closing at US$38.05. Investors are weighing the banking group’s mixed growth profile and looking more closely at valuation.
Over the past month Hilltop Holdings’ share price return fell 3.5%, extending a softer patch that includes a 7 day share price return decline of 1.6% and a 1 day slip of 1.2%. However, the year to date share price return of 12.2% and 3 year total shareholder return of 32.1% indicate momentum has built over a longer horizon, even as investors reassess growth and risk around US$38.05.
Compare Hilltop Holdings with a hand picked group of banks that combine share price resilience and balance sheet strength by scanning our list of solid balance sheet and fundamentals (52 results).
After a pullback that comes against a stronger multi year return profile, the question now is whether Hilltop Holdings at about US$38 still offers an attractive balance between downside risk and upside potential as valuation comes under the microscope.
Most Popular Narrative: 4.1% Undervalued
Hilltop Holdings is trading at $38.05, a small discount to a widely followed narrative fair value of $39.67 that is built on detailed earnings and buyback assumptions.
Demographic tailwinds including rising intergenerational wealth transfers and increased demand for wealth management are already boosting HilltopSecurities' fee-based revenues, and continued momentum in public finance and advisory businesses further diversifies noninterest income, contributing positively to earnings stability.
Want to understand why this narrative sees modest revenue growth, lower margins and a higher future earnings multiple as compatible with today’s valuation? The full story rests on how shrinking earnings, falling share count and the chosen discount rate work together to support that $39.67 figure.
Result: Fair Value of $39.67 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, investors also need to keep an eye on pressure in mortgage origination and rising competition in Hilltop Holdings core Texas markets, which could weigh on earnings.
Find out about the key risks to this Hilltop Holdings narrative.
Another View on Hilltop Holdings Valuation
The first narrative suggests Hilltop Holdings is about 4.1% undervalued at $38.05 relative to a $39.67 fair value. However, the current P/E of 13.5x is higher than the fair ratio of 9x, as well as above the US Banks industry at 11.8x and peers at 12.1x. This points to valuation risk rather than obvious upside. Which signal do you put more weight on?
To see how this price stacks up against earnings power over time, check the detailed valuation breakdown in the See what the numbers say about this price — find out in our valuation breakdown.
Next Steps
If this mixed picture on Hilltop Holdings leaves you unsure, check the data now and decide where you stand by weighing 2 key rewards and 2 important warning signs.
Looking for more investment ideas beyond Hilltop Holdings?
If Hilltop Holdings has you thinking more seriously about where your money works hardest, now is the moment to widen your research and see what else is out there.
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- Prioritise resilience by checking companies filtered for strong finances through the 74 resilient stocks with low risk scores.
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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