What is FSBW's Intrinsic value?

FS Bancorp Inc (FSBW) Intrinsic Value Analysis

Executive Summary

As of June 17, 2025, FS Bancorp Inc's estimated intrinsic value ranges from $57.88 to $71.05 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $57.88 +52.6%
Dividend Discount Model (Stable) $71.05 +87.4%

Is FS Bancorp Inc (FSBW) undervalued or overvalued?

With the current market price at $37.92, 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 FS Bancorp 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 0.61 0.78
Cost of equity 6.7% 9.2%
Cost of debt 5.0% 5.0%
Tax rate 20.1% 20.7%
Debt/Equity ratio 0.17 0.17
After-tax WACC 6.3% 8.5%

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: 19.6%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 7.9%
  • Long-term growth rate: 1.0%
  • Fair value: $57.88 (52.6% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.2% (Low) to 6.7% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $45 to $97
  • Selected fair value: $71.05 (87.4% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $292M
Enterprise Value $342M
Trailing P/E 6.78
Forward P/E 8.01
Trailing EV/EBITDA 0.00
Current Dividend Yield 287.26%
Dividend Growth Rate (5Y) 23.09%
Debt-to-Equity Ratio 0.17

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% $11.58
Dividend Discount Model (Stable) 43% $10.66
Weighted Average 100% $63.52

Investment Conclusion

Based on our comprehensive valuation analysis, FS Bancorp Inc's weighted average intrinsic value is $63.52, which is approximately 67.5% above the current market price of $37.92.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.17)
  • Historical dividend growth of 23.09%

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