Valley National Bancorp Common Stock (VLY) fair value

ACCE thesis

Valley National Bancorp is a New Jersey-based regional bank whose core business is commercial and consumer lending funded by deposits, with a meaningful presence in commercial real estate, equipment finance and residential mortgages. At roughly $7.0 billion in market value, it trades at 10.6 times trailing earnings and 8.4 times forward earnings, a discount that implies the market expects earnings to step up. Revenue grew 15.0% over the period, but the 8.9% return on equity is modest, so the case rests on whether that top-line growth converts into better profitability as rates and loan pricing shift. The 46.8% operating margin is strong for a bank and suggests the revenue growth is reaching the bottom line, though a bank's cost of deposits and credit losses can move that figure quickly. Given the forward multiple and the growth rate, the stock merits a closer look at its net interest margin trend, deposit costs and loan book quality before anyone takes a view on it.