What is PVBC's Intrinsic value?

Provident Bancorp Inc (Maryland) (PVBC) Intrinsic Value Analysis

Executive Summary

As of May 22, 2025, Provident Bancorp Inc (Maryland)'s estimated intrinsic value ranges from $5.76 to $13.34 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $13.34 +19.1%
Dividend Discount Model (Stable) $5.76 -48.6%

Is Provident Bancorp Inc (Maryland) (PVBC) undervalued or overvalued?

With the current market price at $11.20, the stock appears to be fairly valued.

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 Provident Bancorp Inc (Maryland)'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 0.68 0.88
Cost of equity 7.0% 9.8%
Cost of debt 5.0% 5.0%
Tax rate 24.5% 26.3%
Debt/Equity ratio 1 1
After-tax WACC 5.4% 6.7%

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: 0.0%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 8.4%
  • Long-term growth rate: 3.5%
  • Fair value: $13.34 (19.1% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 9.8% (Low) to 7.0% (High)
  • Long-term growth rate: 2.5% (Low) to 4.5% (High)
  • Fair value range: $2 to $9
  • Selected fair value: $5.76 (-48.6% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $199M
Enterprise Value $199M
Trailing P/E 44.67
Forward P/E 22.24
Trailing EV/EBITDA 0.00
Current Dividend Yield 98.92%
Dividend Growth Rate (5Y) 0.00%
Debt-to-Equity Ratio 0.90

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% $2.67
Dividend Discount Model (Stable) 43% $0.86
Weighted Average 100% $10.09

Investment Conclusion

Based on our comprehensive valuation analysis, Provident Bancorp Inc (Maryland)'s weighted average intrinsic value is $10.09, which is approximately 9.9% below the current market price of $11.20.

Key investment considerations:

  • Overall financial health and market position

Given these factors, we believe Provident Bancorp Inc (Maryland) is currently fairly valued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.