COMMERCE BANCSHARES, INC. (CBSH): what the price requires

At today's price, COMMERCE BANCSHARES, INC. (CBSH) is priced for 14.5% return on equity. boothcheck doesn't publish a fair value or a price target; it shows what the price assumes, so you can judge whether that bar is too high.

Generated: 2026-07-14 · Exported: 2026-07-16 · Source: https://boothcheck.com/report/CBSH

Headline

FieldValue
TickerCBSH
CompanyCOMMERCE BANCSHARES, INC.
Current price$58.61/sh
CompositionRetail Banking 34% / Commercial 46% / Wealth 20%

What The Price Requires (Inversion)

The assumption today's price embeds, recovered by inverting the valuation.

FieldValue
Inversion basisfinancials
Return on equity needed14.5%
Return on equity now14.9%
ROE gap-0.4pp
Price-to-book1.99x

Solve inputs: computed at a 9.3% cost of equity with 4% terminal growth over a 5-year stage, on common book equity (FY2026); each 1pp of cost of equity moves the implied ROE ~2pp.

How unusual the bet is: within-range

ReferenceValue
vs own history+0.74σ
cohort percentile (of 119 peers)82
sustained it ~10 years at this level62%
implied end-window share0%

Valuation X-Ray

The price is supported by asset-based and earnings-power and relative-multiple value. A value/asset-supported name, not a pure growth bet.

How the valuation models price the stock relative to the market price. Price/FV above 1.0 means the market pays more than that lens defends (expensive); at or below 1.0 the lens can defend the price.

FamilyMedian price/FVModelsReads
Asset1.17x3expensive
Earnings1.14x2expensive
Relative1.25x3expensive
Growth1.35x1expensive

Families that justify the price: Asset, Earnings, Relative

The models below discount at their own flat-beta convention rates (cost of equity 9.3%, WACC 5.6%); the inversion above states its own rate.

Per-Model Detail (n=9)

ModelFamilyFVPrice/FVApplicableMethodology
DCF Perpetual GrowthGrowth——no—
Bank Fair Value (P/TBV)—$47.671.23xyesTBVPS $26.27 × 1.81x (ROE (TTM) 13.4% / CoE 9.3%, g=5.0% (sustainable: 65% retention × ROE, 5% cap; not the terminal-growth assumption), credit 0.98% allowance/loans → ×0.92)
Relative ValuationRelative$48.201.22xyesP/E 11.53x (blended: static sector reference 10x + trailing (TTM) 15x), scenarios: 9.6x / 11.5x / 13.5x (bear / base = reference held flat / bull), EV/EBITDA N/Ax
Simple DDMGrowth——no—
Two-Stage DDMGrowth——no—
Simple Excess ReturnAsset$41.951.40xyesBV/sh $28.96, ROE (TTM) 13.4%, ke 9.3%
Two-Stage Excess ReturnAsset$50.021.17xyes5yr excess ROE then converge to ke=9.3%
Discounted Future Market CapGrowth$43.511.35xyesRev $1.1B, growth 8% (input: historical growth; tapered), Terminal P/S: 6.3x / 7.6x / 8.9x (bear / base = today's held flat / bull, cap 8x)
Peter Lynch Fair ValueRelative$46.981.25xyesEPS $3.92, growth 6% (input: historical EPS growth), PEG=2.68 (Overvalued)
Margin TrajectoryGrowth——no—
Earnings Power ValueEarnings——no—
Residual IncomeAsset——no—
Graham NumberAsset$50.511.16xyes√(22.5 × EPS $3.92 × BVPS $28.96) — Graham's conservative floor
EV/EBITDA RelativeRelative——no—
FCF YieldEarnings——no—
SBC-Adj FCF YieldEarnings——no—
Ben Graham FormulaEarnings$64.870.90xyesEPS $3.92 × (8.5 + 2×5.6%) × (4.4 / 5.3%)
ROIC-Justified P/BAsset——no—
P/Sales SectorRelative——no—
PEG Fair ValueRelative$33.091.77xyesEPS $3.92 × (PEG 1.5 × growth 5.6% (input: historical EPS growth)) → PE 8.5x
Earnings YieldEarnings$42.331.38xyesEPS $3.92 / required return 9.3% (Rf 4.3% + ERP 5.0%)
Funds From Operations MultipleRelative——no—
Clinical Phase NPVGrowth——no—
MertonAsset——no—
V5 Mechanical———no—

Solvency

Deposit/float-funded balance sheet: debt is funding, not corporate leverage, and GAAP operating cash flow follows loan flows. Net-debt, interest-coverage, and cash-burn lenses do not apply. The solvency frame for a financial is regulatory capital and payout capacity (CET1, stress buffer, dividends plus buybacks against earnings).

Bullet Takeaways

Bull Case

Start with what the market is paying for and test it against the numbers, because Commerce Bancshares is a case where the premium and the fundamentals agree. The stock trades near 1.9 times book value, a clear premium to the average regional bank, and the question is whether the bank earns it. Return on average equity ran 13.2% and return on average assets 1.62% in Q1 2026, with net income of $141.6 million and EPS of $0.96, up from $0.93 a year earlier. A return on assets above 1.5% is the mark of a bank that runs efficiently and underwrites carefully, and Commerce has earned that kind of return through multiple cycles. The premium multiple is the market recognizing a long record of conservative, profitable banking rather than paying up for a story.

The fundamental advantage is the deposit base paired with a genuine fee business. Period-end deposits reached $28.4 billion, with average balances up 11% year-over-year, giving the bank low-cost, stable funding that supports a net interest margin of 3.59%. On top of the lending franchise sits a wealth-management arm contributing roughly a fifth of the business, a source of fee income that does not consume regulatory capital and smooths the rate-cycle volatility that buffets pure spread lenders. The 10-K shows a bank that actively manages its rate exposure, using derivatives so that "changes in interest rates do not adversely affect the net interest margin and cash flows", the kind of disciplined balance-sheet management that keeps earnings steady rather than lurching with the rate cycle.

Capital allocation reflects the same conservatism. The dividend payout ratio sits near 26%, comfortably covered, leaving most earnings to compound book value, and the board expanded the buyback authorization to 7,500,000 shares of remaining capacity as of April 2026. The FineMark acquisition, the first full quarter of which is now in the results, added about $3.9 billion in assets, $2.7 billion in loans, $3.1 billion in deposits, and $8.7 billion in assets under administration, deepening exactly the wealth franchise that differentiates the bank. The bull case is straightforward: a high-quality, fee-diversified bank earning above-peer returns, returning capital prudently, and priced about right for that quality.

Bear Case

The capital-allocation question worth pressing is whether a bank this conservative is the right place to pay a near-2-times-book premium. Commerce retains roughly three-quarters of its earnings and is now deploying capital through acquisition, having just absorbed FineMark. Acquisitions are where a careful bank's discipline is most tested, because the price paid and the credit inherited are decided at the deal table rather than through the bank's own underwriting. FineMark was a wealth and banking franchise, and integrating it adds loans Commerce did not originate and a fee book whose retention depends on keeping acquired advisors and clients. The bull frames the deal as deepening the wealth moat; the bear notes that a serial-buyer posture, even a disciplined one, shifts more of the return on shareholders' capital onto management's deal judgment and away from the organic underwriting that built the premium in the first place.

The structural truth underneath the premium is the same one every high-return bank faces: the price assumes the above-average return persists, and bank returns above the cost of equity mean-revert. The price requires a return on equity around 14%, modestly above the roughly 13% to 15% the bank earns now, sustained for a long time. Conservative banking is a real advantage, but it is not a permanent one; competitors copy the playbook, rate cycles compress the margin, and the wealth-fee growth that differentiates the franchise faces the same fee pressure the whole asset-management industry feels. If the return drifts toward the low-teens cost of equity, a stock at 1.9 times book has room to compress toward the more ordinary multiple regional peers command.

The third weight is concentration and the rate cycle the balance sheet rides. Commerce is a Midwest-centered bank, and net interest margin slipped a basis point sequentially to 3.59%, a reminder that even a well-hedged spread lender is exposed to where rates and deposit costs go. The margin is the engine of the return on equity the price is paying for; if deposit competition intensifies or the yield curve moves against the book, the margin compresses and the premium-to-book is the first thing to re-rate. None of this signals distress. Credit is clean, capital is ample, and the dividend is well covered. The bear case is simply that a steady, conservatively run bank priced at a quality premium has little margin for the return to fade, and fade is what bank returns historically do.

Valuation

The price reduces to a single bank question: how long the return on equity stays above the cost of equity. Commerce earns a return on equity in the 13% to 15% range against a roughly 9% cost of equity, and the price requires it to keep earning around 14%, modestly above today's level, well into the future. That gap, sustained over decades, is what a stock trading near 1.9 times book value embeds. The reference points place that persistence in the upper portion of the regional-bank distribution: a return that far above the cost of equity, held that long, is what a genuinely well-run franchise can do but most banks cannot.

Unlike a stretched growth name, the methods here broadly support the price. The asset-based lens (book value plus the bank's profitability) and the earnings-power methods land at or near the price, and the peer-multiple lens reads it as reasonable against a regional cohort. Only the growth-DCF prices it as expensive, which is the expected signature for a mature bank that compounds steadily rather than rapidly. So this is a value or quality-supported read: you are paying for a durable, fee-diversified franchise, not for a fragile growth assumption floating above every static method.

For a bank the solvency frame is capital and credit, not cash flow, and Commerce sits firmly on the strong side. Deposits are ample and low-cost, credit losses are low, the dividend payout near 26% leaves a wide cushion, and the bank funds growth from retained earnings and disciplined acquisition rather than from stretching its balance sheet. The downside is not a funding event; it is the premium-to-book compressing if the return on equity fades or if the wealth-fee and net-interest-margin engines that produce it weaken. The most concrete path to that runs through the margin and the integration of acquired franchises, which is where a steady bank's results would first diverge from the path the premium is paying for.

Catalysts

The Q1 2026 print was steady and acquisition-shaped. Net income rose to $141.6 million, EPS reached $0.96 from $0.93 a year earlier, return on average equity was 13.2%, and net interest income grew 6% sequentially to $299.8 million, with net interest margin essentially flat at 3.59%. The quarter reflected the first full period of the FineMark Holdings acquisition, which added roughly $3.9 billion in assets, $2.7 billion in loans, $3.1 billion in deposits, and $8.7 billion in assets under administration, materially expanding the wealth franchise. Average deposit balances rose 11% year-over-year to support the larger balance sheet.

Capital return is the steady mechanism to watch. The board increased the dividend and expanded the share-repurchase authorization to 7,500,000 shares of remaining capacity as of April 2026, with a payout ratio near 26% that leaves room for both. From here the two items that move the thesis are integration of FineMark, specifically whether the acquired wealth assets and advisors are retained and whether the deal proves accretive without straining credit, and the trajectory of net interest margin as deposit costs and the rate environment evolve. Both feed directly into the return on equity that the premium-to-book valuation is paying for, so the next several prints are a read on whether the above-peer return holds steady or begins the slow fade that bank returns tend toward.

Peer Cohorts (Per Segment, With Filing Citations)

Retail Banking (reported)

Commercial (reported)

Wealth (reported)

Methodology Note

Fundamentals sourced from SEC EDGAR filings. Current price from Databento. The priced-in inversion and valuation x-ray are computed by the boothcheck engine; narrative composed by AI from the structured data.

Sources

CBSH Q1 2026 earnings release and repurchase authorization, 2026 · CBSH Q1 2026 earnings release · CBSH repurchase authorization, 2026 · CBSH dividend and repurchase disclosures, 2026

View the full interactive CBSH report on boothcheck