What is STL's Intrinsic value?

Sterling Bancorp (STL) Intrinsic Value Analysis

Executive Summary

As of August 17, 2025, Sterling Bancorp's estimated intrinsic value ranges from $26.55 to $30.55 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Multi-Stage) $30.55 +16.2%
Dividend Discount Model (Stable) $26.55 +1.0%

Is Sterling Bancorp (STL) undervalued or overvalued?

With the current market price at $26.29, 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 Sterling Bancorp'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 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 1.15 1.18
Cost of equity 8.1% 10.4%
Cost of debt 5.0% 5.0%
Tax rate 21.0% 21.0%
Debt/Equity ratio 0.1 0.1
After-tax WACC 7.7% 9.8%

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: 15.5%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 9.2%
  • Long-term growth rate: 2.0%
  • Fair value: $30.55 (16.2% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 10.4% (Low) to 8.1% (High)
  • Long-term growth rate: 1.0% (Low) to 3.0% (High)
  • Fair value range: $16 to $37
  • Selected fair value: $26.55 (1.0% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $5066M
Enterprise Value $5587M
Trailing P/E 12.52
Forward P/E 11.32
Trailing EV/EBITDA 0.00
Current Dividend Yield 123.71%
Dividend Growth Rate (5Y) 14.76%
Debt-to-Equity Ratio 0.10

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% $6.11
Dividend Discount Model (Stable) 43% $3.98
Weighted Average 100% $28.84

Investment Conclusion

Based on our comprehensive valuation analysis, Sterling Bancorp's intrinsic value is $28.84, which is approximately 9.7% above the current market price of $26.29.

Key investment considerations:

  • Conservative capital structure (Debt/Equity of 0.10)
  • Historical dividend growth of 14.76%

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