Have you been paying attention to shares of Mercantile Bank (
MBWM Quick Quote MBWM - Free Report) ? Shares have been on the move with the stock up 11.9% over the past month. The stock hit a new 52-week high of $37.74 in the previous session. Mercantile Bank has gained 7% since the start of the year compared to the 2.2% move for the Zacks Finance sector and the 8.4% return for the Zacks Banks - Midwest industry. What's Driving the Outperformance?
The stock has an impressive record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on October 19, 2021, Mercantile Bank reported EPS of $0.95 versus consensus estimate of $0.85 while it beat the consensus revenue estimate by 13.52%.
For the current fiscal year, Mercantile Bank is expected to post earnings of $2.77 per share on $177.67 million in revenues. Meanwhile, for the next fiscal year, the company is expected to earn $2.94 per share on $167.83 million in revenues. This represents a year-over-year change of -26.63% and -5.53%, respectively.
Mercantile Bank may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company has run ahead of itself.
On this front, we can look at the Zacks Style Scores, as they provide investors with an additional way to sort through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.
Mercantile Bank has a Value Score of B. The stock's Growth and Momentum Scores are D and C, respectively, giving the company a VGM Score of B.
In terms of its value breakdown, the stock currently trades at 13.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 11.1X versus its peer group's average of 11.3X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.
We also need to look at the Zacks Rank for the stock, as this supersedes any trend on the style score front. Fortunately, Mercantile Bank currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.
Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Mercantile Bank passes the test. Thus, it seems as though Mercantile Bank shares could have a bit more room to run in the near term.
How Does Mercantile Bank Stack Up to the Competition?
Shares of Mercantile Bank have been soaring, and the company still appears to be a decent choice, but what about the rest of the industry? Some of its industry peers are also impressive, including MidWestOne Financial Group (
MOFG Quick Quote MOFG - Free Report) , Heartland BancCorp. ( HLAN Quick Quote HLAN - Free Report) , and Wintrust Financial ( WTFC Quick Quote WTFC - Free Report) , all of which currently have a Zacks Rank of at least #2 and a VGM Score of at least B, making them well-rounded choices.
The Zacks Industry Rank is in the top 16% of all the industries we have in our universe, so it looks like there are some nice tailwinds for Mercantile Bank, even beyond its own solid fundamental situation.