Merchants Bancorp (MBIN) Margin Decline Challenges Bullish Value Narrative Despite Deep Discount

Merchants Bancorp (MBIN) posted net profit margins of 33.4%, retreating from 44% the year prior, pointing to a clear drop in year-over-year profitability. The bank’s EPS growth hit a 7.6% annual pace over the past five years, with forward-looking earnings growth now projected at 15.3% per year, just under the estimated US market average of 15.6%. All reward signals for MBIN light up positive, as the stock trades at $31.75, well below analyst fair value estimates, and maintains a strong revenue growth outlook. This comes even as recent earnings momentum has softened against the backdrop of still-solid long-term margins.

See our full analysis for Merchants Bancorp.

Next, we’ll see how these headline results compare with the narratives investors and analysts follow most closely, where the numbers support the consensus, and where surprises may shake up expectations.

Curious how numbers become stories that shape markets? Explore Community NarrativesNasdaqCM:MBIN Earnings & Revenue History as at Oct 2025

Margin Compression Narrows Profit Lead

Net profit margins dropped from 44% last year to 33.4% this year, signaling a notable contraction even as MBIN’s absolute margins remain well above typical industry levels. Bulls often cite the consistently high margins as proof of business quality. However, the sharp decline this year raises questions about ongoing cost pressures.

While longer-term earnings grew at a 7.6% annual rate, the last twelve months reversed that trend, showing negative growth and making bullish momentum harder to defend right now. Despite this, bulls highlight that forecasted earnings growth of 15.3% is just below the US market average. This suggests recovery potential if pressures ease.

Profit Growth Lags Behind Market

MBIN’s projected annual earnings growth of 15.3% narrowly trails the US market average of 15.6%. This contrasts with stronger five-year growth that averaged 7.6% per year and shows recent momentum has lost steam. The current market perspective points out that, although MBIN’s historical performance was strong, the recent stagnation may challenge the view that it is a clear outperformer.

Analysts still label MBIN’s earnings quality as “high”, but the shift to negative earnings growth over the last year introduces some risk for investors banking on acceleration. Revenue growth outlook closely matches the market at 10.1% per year. However, unless MBIN can reclaim its prior earnings pace, its near-term story loses some of the edge relative to peers.

Valuation Discount Offers Upside Potential

MBIN trades at a Price-to-Earnings ratio of 7.3x, far below both its peer group average of 18.3x and the US industry average of 16.5x. The $31.75 share price represents a steep 73% discount to DCF fair value of $116.28. This stark discount heavily supports the case that MBIN is undervalued relative to its quality and growth prospects.

All reward indicators flag positive, reinforcing the bullish narrative that value-driven investors may see significant upside if long-term forecasts are achieved. With MBIN’s share price also under the permitted price target of $40.33, the margin of safety versus fundamental value is unusually wide for the sector.

Story Continues

Next Steps

Don't just look at this quarter; the real story is in the long-term trend. We've done an in-depth analysis on Merchants Bancorp's growth and its valuation to see if today's price is a bargain. Add the company to your watchlist or portfolio now so you don't miss the next big move.

See What Else Is Out There

Although MBIN shows value upside, recent margin compression and stalled profit growth make its near-term outlook less dependable than it once was.

For a smoother ride, put your focus on stable growth stocks screener (2125 results) so you can find companies consistently delivering stable earnings, even when others falter.

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include MBIN.

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