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Simmons First's Recent Rebound To Lofty Valuation Levels Leaves Little Room For Error

ALG Research profile picture
ALG Research


  • Credit trends continue to deteriorate, leaving the loan loss reserve to look somewhat underfunded.
  • The stock is now more expensive than its pre-pandemic levels, but is projected to have a lower EPS.
  • The Criticized Loans to Total Loans ratio is the highest it has been in the last 10 years.

Investment Thesis

I think it's a healthy practice for investors to not only review their positive investment decisions, but to also review the names they shied away from in order to fine-turn their investing skills. While it's easy to look back at all the "winners" and rest in your laurels, it takes a good deal of investment maturity to acknowledge past mistakes.

Most recently, the one investment "miss" that comes to mind is Simmons First National Corporation (NASDAQ:SFNC). For me, the Pine Bluff, Arkansas based $22.4 billion dollar asset bank is one that got away. Since I did not expect the company to perform well over the past few months, I missed out on its sizable upside gains. As one can see from my October article, my main investment thesis was,

Growth will likely come more into focus as we progress closer to the end of the year. While the overall growth outlook could improve, along with profitability, I think investors are going to be a little weary of SFNC because of its incredibly acquisitive acquisition history.

While the final decision to not recommend the stock is the only actionable catalyst investors could possibly takeaway from the article, I do find it a bit curious to see SFNC outpace the bank space while at the same time rapidly increase criticized loans.

From a valuation perspective, I continue to recommend would-be potential shareholders to watch SFNC from the sidelines. While I would fully acknowledge that I was wrong in the past, I would currently like to point out the fact that SFNC is more expensive today than at the end of 2019, months before COVID was even a part of the conversation. From my modeling, I also expect the provision to remain a little elevated and limited spread revenue tailwinds to support the

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This article was written by

ALG Research profile picture
Passionate about the banking space and capital markets. Worked at multiple banks throughout the United States for a long time, specializing in credit and portfolio management.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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