What is CBU's Intrinsic value?

Community Bank System Inc (CBU) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Community Bank System Inc's estimated intrinsic value ranges from $61.45 to $69.88 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $69.88 +23.9%
Dividend Discount Model (Stable) $61.45 +8.9%

Is Community Bank System Inc (CBU) undervalued or overvalued?

With the current market price at $56.42, the stock appears to be moderately undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate Community Bank System Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.9% 4.4%
Equity market risk premium 4.6% 5.6%
Adjusted beta 0.78 0.92
Cost of equity 7.5% 10.0%
Cost of debt 5.0% 5.0%
Tax rate 21.5% 21.6%
Debt/Equity ratio 0.09 0.09
After-tax WACC 7.2% 9.5%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 41.4%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.7%
  • Long-term growth rate: 2.0%
  • Fair value: $69.88 (23.9% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.0% (Low) to 7.5% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $34 to $89
  • Selected fair value: $61.45 (8.9% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $2981M
Enterprise Value $3248M
Trailing P/E 12.84
Forward P/E 14.10
Trailing EV/EBITDA 0.00
Current Dividend Yield 312.92%
Dividend Growth Rate (5Y) 2.40%
Debt-to-Equity Ratio 0.09

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Multi-Stage) 57% $13.98
Dividend Discount Model (Stable) 43% $9.22
Weighted Average 100% $66.27

Investment Conclusion

Based on our comprehensive valuation analysis, Community Bank System Inc's weighted average intrinsic value is $66.27, which is approximately 17.5% above the current market price of $56.42.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.09)
  • Historical dividend growth of 2.40%

Given these factors, we believe Community Bank System Inc is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.