MSBI Stock Analysis: Why Midland States Bancorp, Inc. Scored 27% in Stock Value Finder

Midland States Bancorp, Inc. (MSBI): A Detailed Educational Stock Research Review

Overview of Midland States Bancorp, Inc. (MSBI)

Midland States Bancorp, Inc. (MSBI) is a financial holding company headquartered in Effingham, Illinois. As a regional bank, MSBI provides a range of banking and financial services to individuals, businesses, municipalities, and other entities primarily in Illinois and neighboring states. The company operates through several segments, including commercial banking, wealth management, and other financial services.

This article is an educational review from StockValueFinder.com. It is designed to help investors understand how to evaluate key financial metrics when researching stocks. We will examine MSBI’s financial health, efficiency, valuation, and trend signals using the data provided by StockValueFinder’s screening system. This review is not a recommendation to buy or sell MSBI but rather a guide to interpreting the numbers behind the stock.

Why the StockValueFinder Score Matters

StockValueFinder assigns a score to each stock based on a combination of fundamental and technical metrics. The score ranges from 0% to 100%, with higher scores indicating stronger financial health, better valuation, and more favorable trends. Midland States Bancorp, Inc. (MSBI) received a StockValueFinder score of **27%**, which places it in the **"AVOID"** category.

A score of 27% suggests that MSBI does not currently meet StockValueFinder’s criteria for financial strength, efficiency, or valuation. To understand why, we will break down each of the key metrics used in the scoring system. This will help investors learn how to assess these factors in other stocks as well.

EPS Strength and Consistency

What Is EPS?

Earnings per share (EPS) measures a company’s profitability on a per-share basis. It is calculated by dividing net income by the number of outstanding shares. EPS is a critical metric because it shows how much money a company earns for each share of its stock. Consistency in EPS growth is often a sign of a stable and well-managed business.

Why EPS Consistency Matters

Investors generally prefer companies with steady or growing EPS over time. A company with volatile or declining EPS may indicate inconsistent performance, poor cost management, or external challenges affecting profitability. StockValueFinder evaluates EPS consistency as part of its screening process to identify companies with reliable earnings.

MSBI’s EPS Test Result

For MSBI, the StockValueFinder system recorded an EPS test result of **"Did not pass."** This means that the company’s earnings per share did not meet the system’s criteria for consistency or growth.

Since exact EPS values were not supplied, we cannot analyze the specific earnings history. However, the failure of this test suggests that MSBI’s earnings may have been inconsistent, declining, or otherwise insufficient to meet StockValueFinder’s standards.

Example for Learning

For comparison, consider two hypothetical companies

– **Company A** has grown its EPS from $1.00 to $1.50 over the past five years, with no annual declines. – **Company B** has seen its EPS fluctuate between $0.80 and $1.30 over the same period, with two years of declines.

Company A would likely pass an EPS consistency test, while Company B might fail. This illustrates why steady earnings growth is often preferred by investors.

ROIC and Capital Efficiency

What Is ROIC?

Return on invested capital (ROIC) measures how effectively a company uses its capital to generate profits. It is calculated as:

**ROIC = (Net Operating Profit After Tax) / (Total Invested Capital)**

ROIC is a key indicator of a company’s efficiency and competitive advantage. A high ROIC suggests that a company is generating strong returns from its investments, while a low or negative ROIC may indicate poor capital allocation or weak business performance.

What Is a Strong ROIC?

StockValueFinder generally prefers companies with an ROIC of **10% or higher**. This threshold suggests that the company is generating sufficient returns to justify its capital investments. For example: – A company with a **15% ROIC** is typically using its capital more efficiently than one with a **4% ROIC**. – A **negative ROIC** (such as -13.14%) indicates that the company is losing money on its invested capital, which is a red flag for investors.

MSBI’s ROIC

Midland States Bancorp, Inc. has an ROIC of **-13.14%**. This negative ROIC means that the company is not generating enough profit to cover its cost of capital. In fact, it is losing money on its investments.

Why MSBI Failed the ROIC Test

Given that StockValueFinder prefers an ROIC of 10% or higher, MSBI’s ROIC of -13.14% is well below the acceptable range. This is a significant concern because it suggests that the company’s operations are not generating sufficient returns for shareholders. A negative ROIC can result from poor loan performance, high operating costs, or inefficient use of capital—all of which are risks for investors.

Example for Learning

Imagine two banks

– **Bank X** has an ROIC of 12%. This means it earns $12 for every $100 of invested capital, indicating strong efficiency. – **Bank Y** has an ROIC of -5%. This means it loses $5 for every $100 of invested capital, signaling poor performance.

Bank X would pass the ROIC test, while Bank Y would fail. MSBI’s ROIC of -13.14% places it in a similar category to Bank Y, which is why it failed this test.

Interest Coverage and Financial Safety

What Is Interest Coverage?

Interest coverage measures a company’s ability to pay the interest on its debt. It is calculated as:

**Interest Coverage = (Earnings Before Interest and Taxes) / (Interest Expense)**

A higher interest coverage ratio indicates that a company can easily meet its interest obligations, while a low ratio suggests financial strain.

What Is a Strong Interest Coverage Ratio?

StockValueFinder prefers an interest coverage ratio of **6 or higher**. This means the company earns at least six times its annual interest expense, providing a comfortable margin of safety. For example: – A company with an interest coverage ratio of **8x** is in a healthier position than one with a ratio of **2x**. – A ratio below **1x** means the company is not earning enough to cover its interest payments, which is a serious risk.

MSBI’s Interest Coverage Test Result

For MSBI, the StockValueFinder system recorded an interest coverage test result of **"Did not pass."** This means the company’s interest coverage ratio did not meet the system’s threshold of 6 or higher.

Since the exact interest coverage ratio was not supplied, we cannot analyze the specific number. However, the failure of this test suggests that MSBI’s ability to cover its interest expenses may be weak, which could indicate financial stress or high debt levels.

Example for Learning

Consider two companies

– **Company C** has an interest coverage ratio of 7x. This means it earns seven times its annual interest expense, indicating strong financial health. – **Company D** has an interest coverage ratio of 1.5x. This means it barely earns enough to cover its interest payments, signaling potential financial risk.

Company C would pass the interest coverage test, while Company D would fail. MSBI’s failure of this test suggests it may be closer to Company D’s situation.

Debt Payback and Balance Sheet Discipline

What Is Debt Payback?

Debt payback measures how long it would take a company to pay off its total debt using its current earnings. It is calculated as:

**Debt Payback Years = (Total Debt) / (Annual Earnings)**

A shorter debt payback period indicates a stronger balance sheet and lower financial risk.

What Is a Strong Debt Payback Period?

StockValueFinder prefers a debt payback period of **3 years or less**. This means the company could theoretically pay off its debt within three years using its earnings. For example: – A debt payback period of **1.5 years** is more attractive than one of **7 years**. – A period exceeding **5 years** may indicate high leverage and financial risk.

MSBI’s Debt Payback

Midland States Bancorp, Inc. has a debt payback period of **2.66 years**. This means the company could pay off its total debt in approximately 2.66 years using its current earnings.

Why MSBI Passed the Debt Payback Test

MSBI’s debt payback period of 2.66 years is below the StockValueFinder threshold of 3 years. This is a positive sign, as it indicates that the company’s debt levels are manageable relative to its earnings. A shorter debt payback period reduces financial risk and suggests a stronger balance sheet.

Example for Learning

Imagine two companies

– **Company E** has a debt payback period of 2 years. This means it could pay off its debt in two years, indicating low financial risk. – **Company F** has a debt payback period of 10 years. This means it would take a decade to pay off its debt, signaling high leverage and risk.

Company E would pass the debt payback test, while Company F would fail. MSBI’s debt payback period of 2.66 years places it closer to Company E, which is why it passed this test.

P/E Ratio and Valuation Discipline

What Is the P/E Ratio?

The price-to-earnings (P/E) ratio measures a company’s current stock price relative to its earnings per share. It is calculated as:

**P/E Ratio = (Stock Price) / (Earnings Per Share)**

The P/E ratio helps investors assess whether a stock is overvalued or undervalued relative to its earnings. A lower P/E ratio may indicate a better value, while a higher P/E ratio may suggest that the stock is expensive.

What Is a Strong P/E Ratio?

StockValueFinder prefers a P/E ratio of **15 or lower** for valuation discipline. This threshold helps investors avoid overpaying for a stock. For example: – A P/E ratio of **8** may indicate a more value-oriented investment, assuming the business quality is sound. – A P/E ratio of **40** may suggest that the stock is overvalued, especially if earnings growth does not justify the premium.

MSBI’s P/E Ratio

Midland States Bancorp, Inc. has a P/E ratio of **20.65**. This means the stock is trading at 20.65 times its earnings per share.

Why MSBI Failed the P/E Valuation Test

MSBI’s P/E ratio of 20.65 is above StockValueFinder’s preferred threshold of 15. This suggests that the stock may be overvalued relative to its earnings. While a P/E ratio alone does not tell the full story, a higher P/E ratio can indicate that investors are paying a premium for the stock, which may not be justified if the company’s growth prospects or financial health are weak.

Example for Learning

Consider two stocks

– **Stock G** has a P/E ratio of 12. This suggests it may be undervalued or fairly valued, depending on its growth prospects. – **Stock H** has a P/E ratio of 30. This suggests it may be overvalued, especially if its earnings growth does not support the premium.

Stock G would pass the P/E valuation test, while Stock H would fail. MSBI’s P/E ratio of 20.65 places it closer to Stock H, which is why it failed this test.

Moving Average Trend and Entry Timing

What Is the Moving Average Signal?

The moving average signal is a technical indicator that helps investors assess the trend of a stock’s price. It compares the stock’s current price to its moving average (typically the 50-day or 200-day moving average) to determine whether the trend is bullish, bearish, or neutral.

Why the Moving Average Matters

While fundamental metrics like ROIC and P/E ratio focus on a company’s financial health, the moving average signal provides insight into the stock’s price trend. A bullish signal may indicate upward momentum, while a bearish signal may suggest downward pressure. StockValueFinder uses this signal as part of its timing discipline, not as proof that the stock must rise or fall.

MSBI’s Moving Average Signal

For MSBI, the StockValueFinder system recorded a moving average signal of **"NEUTRAL / WATCH."** This means the stock’s price is neither clearly above nor below its moving average, and investors should monitor it for potential changes in trend.

Entry Signal and Risk Levels

The StockValueFinder system did not provide an **entry signal**, **limit buy idea**, **pullback zone**, or **risk/trend level** for MSBI. This means there are no specific reference levels for potential entry or exit points. Investors should rely on their own analysis or additional research for timing decisions.

Example for Learning

Imagine two stocks

– **Stock I** is trading above its 200-day moving average, with a bullish signal. This may indicate upward momentum. – **Stock J** is trading below its 200-day moving average, with a bearish signal. This may indicate downward pressure.

Stock I would have a more favorable moving average signal than Stock J. MSBI’s neutral signal suggests it is not exhibiting a clear trend in either direction.

Overall Financial Strengths and Weaknesses

Strengths

1. **Debt Payback Period**: MSBI’s debt payback period of 2.66 years is a positive sign. It indicates that the company’s debt levels are manageable relative to its earnings, reducing financial risk. 2. **Regional Banking Presence**: As a regional bank, MSBI may benefit from local market knowledge and customer relationships, which can provide stability in its core operations.

Weaknesses

1. **Negative ROIC**: MSBI’s ROIC of -13.14% is a significant concern. A negative ROIC suggests that the company is losing money on its invested capital, which is a red flag for investors. 2. **Failed EPS Test**: The failure of the EPS test indicates that MSBI’s earnings may be inconsistent or declining, which could signal underlying business challenges. 3. **Failed Interest Coverage Test**: The failure of the interest coverage test suggests that MSBI may struggle to cover its interest expenses, indicating potential financial stress. 4. **High P/E Ratio**: MSBI’s P/E ratio of 20.65 is above StockValueFinder’s preferred threshold of 15, suggesting that the stock may be overvalued relative to its earnings. 5. **Neutral Moving Average Signal**: The neutral moving average signal indicates that the stock is not exhibiting a clear trend, which may limit short-term trading opportunities.

Risks and Limitations

Financial Risks

1. **Negative ROIC**: A negative ROIC is a major risk, as it indicates that MSBI is not generating sufficient returns on its invested capital. This could be due to poor loan performance, high operating costs, or inefficient capital allocation. 2. **Interest Coverage Concerns**: The failure of the interest coverage test suggests that MSBI may have difficulty meeting its interest obligations, which could lead to financial strain or increased borrowing costs. 3. **Earnings Inconsistency**: The failure of the EPS test indicates that MSBI’s earnings may be volatile or declining, which could erode investor confidence and reduce the stock’s attractiveness.

Valuation Risks

1. **High P/E Ratio**: MSBI’s P/E ratio of 20.65 is above StockValueFinder’s preferred threshold of 15. This suggests that the stock may be overvalued, especially if its earnings do not improve. 2. **Lack of Growth Prospects**: If MSBI’s earnings do not grow, the high P/E ratio could become even less justifiable, potentially leading to a decline in the stock price.

Market and Sector Risks

1. **Regional Banking Challenges**: As a regional bank, MSBI is exposed to risks specific to its local markets, such as economic downturns, competition from larger banks, or changes in interest rates. 2. **Regulatory Risks**: Banks operate in a highly regulated industry, and changes in regulations could impact MSBI’s operations, profitability, or capital requirements. 3. **Interest Rate Sensitivity**: Banks are sensitive to changes in interest rates. If interest rates rise, MSBI’s borrowing costs could increase, while falling rates could reduce its net interest margin.

Limitations of This Analysis

1. **Incomplete Data**: This review is based on the supplied metrics from StockValueFinder. Some data points, such as exact EPS values or interest coverage ratios, were not provided. This limits the depth of the analysis. 2. **No Forward-Looking Statements**: This article does not include analyst estimates, future earnings projections, or other forward-looking information. Investors should conduct additional research to assess MSBI’s growth prospects. 3. **No Dividend Analysis**: Dividend data was not supplied, so this review does not evaluate MSBI’s dividend history, yield, or sustainability. 4. **No Competitive Analysis**: This review does not compare MSBI to its peers in the regional banking industry. Investors should consider how MSBI stacks up against competitors in terms of financial health, valuation, and growth.

Educational Conclusion

This educational review of Midland States Bancorp, Inc. (MSBI) has broken down the key financial metrics used by StockValueFinder to evaluate stocks. By examining MSBI’s EPS consistency, ROIC, interest coverage, debt payback, P/E ratio, and moving average signal, we can better understand why the stock received a **27% score** and an **"AVOID"** rating.

Key Takeaways for Investors

1. **EPS Consistency Matters**: Steady or growing earnings per share are a sign of a well-managed company. MSBI failed the EPS test, indicating potential earnings volatility or decline. 2. **ROIC Is Critical**: A positive ROIC of 10% or higher is generally preferred. MSBI’s ROIC of -13.14% is a red flag, suggesting poor capital efficiency. 3. **Interest Coverage Is a Safety Net**: A strong interest coverage ratio (6x or higher) indicates financial stability. MSBI failed this test, signaling potential difficulty in meeting interest obligations. 4. **Debt Payback Reflects Balance Sheet Strength**: A shorter debt payback period (3 years or less) is preferable. MSBI passed this test with a debt payback period of 2.66 years, which is a positive sign. 5. **P/E Ratio Helps Assess Valuation**: A lower P/E ratio (15 or below) may indicate better value. MSBI’s P/E ratio of 20.65 suggests the stock may be overvalued relative to its earnings. 6. **Moving Average Signals Provide Trend Insight**: While not a fundamental metric, the moving average signal can help investors assess short-term trends. MSBI’s neutral signal indicates no clear trend.

How to Apply This Knowledge to Other Stocks

When evaluating other stocks, investors can use the same framework

– **Check EPS consistency** to assess earnings stability. – **Calculate ROIC** to evaluate capital efficiency. – **Review interest coverage** to gauge financial safety. – **Assess debt payback** to understand balance sheet strength. – **Compare P/E ratios** to determine valuation. – **Monitor moving average signals** for trend insights.

Final Thoughts

Midland States Bancorp, Inc. (MSBI) presents several financial challenges, including a negative ROIC, failed EPS and interest coverage tests, and a high P/E ratio. While the company’s debt payback period is a positive, the overall financial profile does not meet StockValueFinder’s criteria for a strong investment.

This article is for research and educational purposes only. It is not personal financial advice, investment advice, or a recommendation to buy or sell any security. Investors should conduct their own research, consider their risk tolerance, and consult with a financial advisor before making any investment decisions.

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