Commerce Bancshares

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Commerce Bancshares ( CBSH), headquartered in Kansas City, operates in the Southwest. With a near-$4 billion market capitalization, this larger regional player may be ripe for an acquisition. Shares are not cheap, trading for 1.8 times book value, but the bank is profitable, and its some 400 branches may be attractive to one of the bigger national banks.

Possibly reflecting the takeover potential of the stock, investors have bid up shares this year. Commerce is up a solid 8% in 2011, easily outperforming other banks and tracking closely with the performance of the overall market. I find the move higher in the stock a bit surprising, considering profit growth in 2011 is expected to slow to 12%. 2010 profits of $2.52 per share were 27% higher than in the year prior. For the current year, the average Wall Street estimate for earnings is $2.83 per share.

Related: Top-Rated Regional Bank Stocks

12% growth is nothing to sneeze at, but given the relatively steep valuation for the stock -- shares currently trade for 15 times 2011 estimated earnings -- one could expect a bit more. Even more worrisome would be that profit growth from 2011 to 2012 is expected to slow even further to 6%.

Wall Street firm Morgan Keegan rates Commerce shares at outperform. I would prefer owning the stock at a lower price.

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