Is Preferred Bank (PFBC) Still a Buy at $97? A Deep Dive into Undervaluation and Profitability

Investors seeking undervalued opportunities in the banking sector often turn to metrics like price-to-earnings (P/E) ratios, price-to-book (P/B) ratios, and return on equity (ROE) to identify mispriced stocks. Preferred Bank (PFBC), a regional financial institution with a history of disciplined capital allocation, has drawn attention as its shares trade near $97. This article evaluates whether PFBC remains a compelling buy by analyzing its valuation metrics and profitability relative to industry benchmarks.

Undervaluation: A Compelling Discount to Intrinsic Metrics

Preferred Bank's trailing P/E ratio of 9.82 and forward P/E of 9.13 stand in stark contrast to the U.S. banks industry's average P/E of 15.3x as of January 2026. This 37% discount suggests the market is pricing PFBC at a significant discount to its peers, even as the broader industry trades above its 3-year average of 12.1x. Such a gap raises questions about whether PFBC's lower valuation reflects temporary headwinds or a persistent undervaluation of its fundamentals.

The price-to-book ratio further underscores this divergence. At 1.51 P/B ratio, PFBC's P/B ratio implies investors are paying just 51% more than the bank's book value per share of $62.81. By comparison, many regional banks trade at P/B ratios exceeding 1.8x, reflecting stronger balance sheet premiums. This discrepancy hints at a potential disconnect between PFBC's tangible equity and its market capitalization.

Profitability: A High-ROE Outlier in a Low-Yield Environment

Preferred Bank's profitability metrics paint a picture of operational excellence. Its 2025 ROE of 16.91% dwarfs the industry's typical range of 8-12%, a testament to its ability to generate returns well above the cost of capital. This outperformance is driven by a robust net interest margin of 4.06% in Q4 2024, significantly higher than the U.S. banking industry's average NIM of 3.34%.

The widening NIM- bolstered by a 11-basis-point increase-positions PFBC to sustain profitability even as interest rates stabilize. For context, the industry's NIM expansion of 9 basis points year-over-year pales next to PFBC's consistent margin management, which has historically insulated it from rate volatility.

The Case for a Buy at $97

Combining these metrics, PFBC appears undervalued relative to both its intrinsic financials and industry peers. A trailing P/E of 9.82 implies the market assigns PFBC a lower growth or risk profile than its ROE and NIM suggest. Meanwhile, its 16.91% ROE-among the highest in regional banking-justifies a premium valuation, particularly as investors increasingly prioritize capital efficiency.

At $97 per share, PFBC trades at a P/B ratio of 1.51, meaning its market cap represents just 1.51 times its book value. If the market were to re-rate PFBC to align with the industry's average P/B of 1.8x, shares would need to rise approximately 19% to $116, assuming book value remains stable. This scenario becomes more plausible as the bank's ROE and NIM continue to outperform, potentially attracting value-conscious investors and institutional buyers seeking high-quality earnings.

Conclusion

Preferred Bank's combination of a discounted valuation and superior profitability metrics makes it a compelling candidate for investors willing to bet on a re-rating. While macroeconomic risks-such as loan defaults or regulatory shifts-remain, PFBC's strong capital position and margin resilience mitigate many of these concerns. At $97, the stock offers an attractive entry point for those who believe the market has underappreciated its ability to compound equity and sustain high returns.