Merchants Bancorp (MBIN): A Bull Case Theory

Core Thesis - Merchants Bancorp (MBIN) is currently undervalued, trading below book value despite strong historical performance metrics, including a long-term average ROE of 21% and significant growth in BVPS and EPS [2][4] Financial Performance - As of November 26th, MBIN's share price was $32.82, with a trailing P/E of 7.54 [1] - The company has experienced a surge in delinquent loans due to a fraud scheme, but the losses are primarily in government-backed multifamily and healthcare portfolios, which limits long-term damage [2][3] - MBIN continues to generate substantial pre-tax, pre-provision earnings, providing a buffer against losses while remaining profitable [4] Growth Potential - The multifamily segment has shown an impressive 11.6% ROA, which translates into triple-digit ROE when leveraged, driven by gain-on-sale economics [3] - If book value compounds to $60 by 2028 and the market assigns a 1.5x multiple, shares could approach $90, indicating a potential tripling in value over three years [5] Management and Ownership - Founders Michael Petrie and Randall Rogers own approximately 40% of the company and have a strong track record in capital-constrained niches [3] - The potential for a future sale of the company is considered a reasonable upside scenario as the founders near retirement [5] Market Sentiment - Despite the negative sentiment surrounding delinquency headlines, the stock is seen as embedding overly pessimistic assumptions, trading at 0.9x book value and roughly 4-5x normalized earnings [4]