WAL Stock Study (10-27-25)
Posted by Mark on January 23, 2025 at 06:59 | Last modified: October 27, 2025 08:40I recently did a stock study on Western Alliance Bancorp (WAL, $79.30). Previous studies are here, here, here, and here.
M* writes:
> Western Alliance Bancorporation is a Las Vegas-based holding company
> with regional banks operating in Nevada, Arizona, and California. The bank
> offers retail banking services and focuses on mortgages for retail
> customers and commercial loans. The company’s reportable segments are
> Commercial segment includes provides commercial banking and treasury
> management products and services to small and middle-market businesses,
> specialized banking services to sophisticated commercial institutions and
> investors within niche industries, as well as financial services to the
> real estate industry. Consumer Related segment offers both commercial
> banking services to enterprises in consumer-related sectors and consumer
> banking services, such as residential mortgage banking. Corporate & Other.
Over the past decade, this medium-size company has grown sales and EPS at annualized rates of 22.1% and 17.0%, respectively. Lines are mostly up, straight, and parallel except for EPS decline in ’23. Five- (10-) year EPS R^2 is 0.06 (0.82) and Value Line (VL) gives an Earnings Predictability score of 70.
Over the past decade, PTPM leads peer and industry averages despite falling from 50.0% (’15) to 32.0% (’24) with a last-5-year mean of 46.3%. ROE leads peer and industry averages despite edging lower from 13.8% (’15) to 12.2% (’24) with a last-5-year mean of 16.9%. Debt-to-Capital has jumped above peer and industry averages over the last few years while increasing from 18.5% (’15) to 49.7% (’24) with a last-5-year mean of 41.1%.
M* gives a [distressing] Financial Health grade of C (per BI website) and VL rates the company B+ for Financial Strength.
ROAA increases from 1.56% in ’15 to 1.94% in ’21 before falling to 1.02% in the last two years (low for the 10-year period). Anything above 1.25% (1.50%) is great (exceptional). This could stand some improvement.
With regard to sales growth:
- YF projects YOY 10.0% and 8.8% for ’25 and ’26, respectively (based on 10 analysts).
- Zacks projects YOY 9.3% and 9.2% for ’25 and ’26, respectively (2 analysts).
- CFRA gives ACE of 10.0% YOY and 9.4% per year for ’25 and ’24-’26, respectively (10).
- M* gives 2-year ACE of 10.4% per year.
I am forecasting below the range at 8.0% per year.
With regard to EPS growth:
- MarketWatch projects 22.8% and 22.7% per year for ’24-’26 and ’24-’27, respectively (based on 17 analysts).
- Nasdaq.com projects 22.5% YOY and 17.0% per year for ’26 and ’25-’27 (9 / 9 / 4 analysts for ’25 / ’26 / ’27).
- Seeking Alpha projects 4-year annualized growth of 17.0%.
- Finviz gives ACE 5-year annualized growth of 18.5% (8).
- LSEG gives LTG estimate of 17.0%.
- YF projects YOY 21.6% and 23.8% for ’25 and ’26, respectively (14).
- Zacks projects YOY 18.7% and 22.6% for ’25 and ’26, respectively (9), along with 5-year annualized growth of 17.0%.
- VL provides ACE of 16.5% annualized growth for the next 5 years (9).
- CFRA gives ACE of 18.5% YOY and 21.1% per year for ’25 and ’24-’26, respectively (14).
My forecast of 10.0% per year is well below the long-term estimate range (mean of five: 17.2%). Initial value is ’24 EPS of $7.09 rather than 2025 Q2 EPS of $7.61 (annualized).
My Forecast High P/E is 10.0. Over the past 10 years, high P/E falls from 19.3 (’15) to 13.8 (’24) with a last-5-year mean of 13.1 and a last-5-year-mean average P/E of 9.1. I am below the 10-year high P/E range.
My Forecast Low P/E is 5.0. Over the past 10 years, low P/E falls from 12.1 (’15) to 7.6 (’24) with a last-5-year mean of 5.0. I am forecasting toward lower end of the range [only ’23 (1.1: potential outlier during period of extreme market volatility) and ’20 (4.1) are less].
My Low Stock Price Forecast (LSPF) is $55.00. Default ($35.50) based on initial value given above seems unreasonably low at 55.2% (37.7%) less than previous close (52-week low). My LSPF (arbitrary) is 30.6% (3.5%) less, respectively.
WAL commences dividend in 2019 with a last-5-year mean Payout Ratio (PR) of 16.2%. My 10.0% forecast is below the range.
These inputs land WAL in the HOLD zone with a U/D ratio of 1.4. Total Annualized Return (TAR) is 8.6%.
PAR (using Forecast Average—not High—P/E) of 2.9% is less than the current yield on T-bills. If a healthy margin of safety (MOS) anchors this study, then I can proceed based on TAR instead.
To assess MOS, I compare my inputs with those of Member Sentiment (MS). Based on 50 studies done in the past 90 days (my study along with 19 outliers excluded), averages (lower of mean/median) for projected sales growth, projected EPS growth, Forecast High P/E, Forecast Low P/E, and PR are 10.0%, 11.5%, 12.6, 5.9, and 16.8%, respectively. I am lower across the board. VL projects a 2026 average annual P/E of 7.2 that is less than MS (9.3) and mine (7.5).
MS high / low EPS are $13.03 / $7.54 versus my $11.42 / $7.09 (per share). My high EPS is less due to a lower growth rate.
MS LSPF of $45.70 implies a Forecast Low P/E of 6.1: greater than the above-stated 5.9. MS LSPF is 2.7% greater than the default $7.54/share * 5.9 = $44.49 resulting in more aggressive zoning. MS LSPF is 16.9% less than mine, however.
With regard to valuation, PEG is 0.6 and 0.9 per Zacks and my projected P/E, respectively: slightly undervalued (M* agrees at 0.74). Relative Value [(current P/E) / 5-year-mean average P/E] is slightly elevated at 1.14.
MOS is robust in the current study because my inputs are near or below MS and respective analyst/historical ranges. As further evidence, MS TAR is [a lofty] 8.6% per year greater than mine.
Per U/D, WAL is a BUY under $69/share. BI TAR criterion is met [114.2 / ((13.87 / 100 ) +1 ) ^ 5] ~ $59.50 with a forecast high price ~$114.
Full disclosure: I currently own WAL shares.
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