The strong outlook of Midland States Bancorp Inc MSBI overshadows the near-term volatility, KBW said while initiating the coverage of the stock with an Outperform rating and $26 price target.
"Armed with a unique and diversified business model, excess capital, and record growth pipelines, Midland States Bancorp is well positioned to capitalize on its favorable competitive positioning and to expand market share in all of its businesses," analyst Michael Perito wrote in a note.
Perito said the market is undervaluing the company's revenue stream and its diversified business model should expand core profitability as the bank continues to grow towards $5 billion in assets.
Perito sees 2016 and 2017 EPS estimates of $2.25 and $2.20, respectively. The Street expects earnings of $2.03 a share for 2016 and $2.17 a share for 2017.
"While near-term volatility surrounding accretable yield and mortgage revenues certainly exists, we believe that at just over 1.2x pro-forma tangible book value today, investors are adequately compensated for these risks in order to invest in a growing and diversified financial services company," Perito highlighted.
Shares of Midland States Bancorp closed Monday's regular trading session at $22.14.
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