There are many thousands of community banks from which an analyst can create a statistical sample. The quantity of small banks allows an analyst to become familiar with the typical valuation relationships that banks display.
Southern Missouri Bancorp (SMBC) appears to be selling out of line with its peers -- particularly considering its credit quality, its efficiency, and its historical ability to grow assets and deposits. The bank has a strong position and has demonstrated improvement over the last few years. As for an earnings yield, an investor would be wise to expect a 10% to 11% earnings yield and a 2.25% dividend. But, considering the quality of the bank, it seems likely that the bank will sell...
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