What is COLB's Intrinsic value?

Columbia Banking System Inc (COLB) Intrinsic Value Analysis

Executive Summary

As of June 4, 2025, Columbia Banking System Inc's estimated intrinsic value ranges from $26.39 to $35.94 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $35.94 +53.3%
Dividend Discount Model (Stable) $26.39 +12.6%

Is Columbia Banking System Inc (COLB) undervalued or overvalued?

With the current market price at $23.44, the stock appears to be significantly 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 Columbia Banking 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 0.8 0.9
Cost of equity 7.5% 9.9%
Cost of debt 5.0% 5.0%
Tax rate 21.1% 23.1%
Debt/Equity ratio 0.14 0.14
After-tax WACC 7.1% 9.2%

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: 60.5%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.7%
  • Long-term growth rate: 1.0%
  • Fair value: $35.94 (53.3% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.9% (Low) to 7.5% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $18 to $35
  • Selected fair value: $26.39 (12.6% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $4927M
Enterprise Value $5548M
Trailing P/E 9.93
Forward P/E 8.57
Trailing EV/EBITDA 0.00
Current Dividend Yield 611.24%
Dividend Growth Rate (5Y) 33.16%
Debt-to-Equity Ratio 0.14

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% $7.19
Dividend Discount Model (Stable) 43% $3.96
Weighted Average 100% $31.85

Investment Conclusion

Based on our comprehensive valuation analysis, Columbia Banking System Inc's weighted average intrinsic value is $31.85, which is approximately 35.9% above the current market price of $23.44.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.14)
  • Historical dividend growth of 33.16%

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