Meridian Bank (MRBK) Hits Fresh High: Is There Still Room to Run?

Shares of Meridian Bank (MRBK) have been strong performers lately, with the stock up 12.8% over the past month. The stock hit a new 52-week high of $30.5 in the previous session. Meridian Bank has gained 39.7% since the start of the year compared to the 21% move for the Zacks Finance sector and the 33.5% return for the Zacks Banks - Northeast industry.

What's Driving the Outperformance?

The stock has a great record of positive earnings surprises, as it hasn't missed our earnings consensus estimate in any of the last four quarters. In its last earnings report on July 26, 2021, Meridian Bank reported EPS of $1.33 versus consensus estimate of $1.16 while it beat the consensus revenue estimate by 1.57%.

For the current fiscal year, Meridian Bank is expected to post earnings of $5.27 per share on $149.25 million in revenues. This represents a 23.42% change in EPS on a 7.34% change in revenues. For the next fiscal year, the company is expected to earn $3.3 per share on $131.35 million in revenues. This represents a year-over-year change of -37.38% and -11.99%, respectively.

Valuation Metrics

Meridian Bank may be at a 52-week high right now, but what might the future hold for the stock? A key aspect of this question is taking a look at valuation metrics in order to determine if the company is due for a pullback from this level.

On this front, we can look at the Zacks Style Scores, as these give investors a variety of ways to comb through stocks (beyond looking at the Zacks Rank of a security). These styles are represented by grades running from A to F in the categories of Value, Growth, and Momentum, while there is a combined VGM Score as well. The idea behind the style scores is to help investors pick the most appropriate Zacks Rank stocks based on their individual investment style.

Meridian Bank has a Value Score of A. The stock's Growth and Momentum Scores are B and B, respectively, giving the company a VGM Score of A.

In terms of its value breakdown, the stock currently trades at 5.5X current fiscal year EPS estimates. On a trailing cash flow basis, the stock currently trades at 7.2X versus its peer group's average of 11.9X. This isn't enough to put the company in the top echelon of all stocks we cover from a value perspective.

Zacks Rank

We also need to consider the stock's Zacks Rank, as this supersedes any trend on the style score front. Fortunately, Meridian Bank currently has a Zacks Rank of #2 (Buy) thanks to rising earnings estimates.

Since we recommend that investors select stocks carrying Zacks Rank of 1 (Strong Buy) or 2 (Buy) and Style Scores of A or B, it looks as if Meridian Bank passes the test. Thus, it seems as though Meridian Bank shares could have potential in the weeks and months to come.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.