KeyCorp

(New York Stock Exchange)
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Bullish +65

KeyCorp (KEY) Stock Looks Below Fair Value On Current Earnings

Financial outlook AI-generated analysis

πŸ“ˆ KeyCorp's share price has gained 114.3% over the past three years, raising questions about whether current valuation supports its capital returns.

πŸ’° The bank recently secured US$92.9 million in financing for a large affordable housing project to support future interest income.

πŸ“Š KeyCorp trades at an 11.2x P/E ratio while the Excess Returns model projects a stable EPS of $2.12 per share.

🏦 The financial model assumes a Return on Equity of 12.24% with a book value growing from $16.14 to a stable estimate of $17.29.

πŸ’΅ The analysis identifies an excess return of $0.83 per share, calculated after subtracting the cost of equity of $1.29 per share.

πŸ“‰ Current market pricing at $19.79 is deemed substantially below the intrinsic value suggested by durable excess earnings projections.

πŸ—£οΈ Community narratives on Simply Wall St currently rate KeyCorp as 22% undervalued based on margin improvement potential.

Bullish Signals
  • The Excess Returns model indicates KeyCorp's estimated intrinsic value is substantially above the current share price of $19.79.
  • KeyCorp is projected to generate a stable earnings base with an EPS of $2.12 and a Return on Equity of 12.24%.
  • The bank's balance sheet is expected to compound rather than shrink, supported by a stable book value estimate of $17.29.
  • Recent financing of US$92.9 million for an affordable housing project adds interest-earning assets to the equity base.
  • Community narratives suggest KeyCorp is 22% undervalued due to potential benefits from multi-year margin improvements.
Full Analysis
KeyCorp (KEY) has experienced a significant 114.3% share price increase over the past three years, prompting an analysis of whether its current valuation is justified by its capital returns. The article utilizes an Excess Returns model to assess the bank's intrinsic value, comparing the cost of equity against the earnings generated on that capital. According to the financial model, KeyCorp is expected to maintain a stable earnings base with an EPS of $2.12 and a Return on Equity of 12.24%. The analysis assumes a book value of $16.14 per share growing to a stable estimate of $17.29, driven by the bank's ability to compound its balance sheet rather than shrink. The model calculates an excess return of $0.83 per share after accounting for a cost of equity of $1.29 per share. Based on these durable excess earnings and recent lending activity, including a $92.9 million financing for an affordable housing project, the estimated intrinsic value is substantially higher than the current market price of $19.79. Simply Wall St's community narratives currently suggest KeyCorp is 22% undervalued, citing potential benefits from multi-year margin improvements. The article concludes that despite recent pullbacks and fresh lending activity, the market price does not fully reflect the gap between capital costs and the returns KeyCorp earns.