Credicorp (BAP) Stock May Be A Bargain On Excess Returns

Credicorp has delivered a very strong long term share price run, yet the key question now is whether the current valuation lines up with the returns it earns on its capital. Recent pullbacks over shorter periods add another layer, because they leave investors asking if the stock still reflects what the business can realistically generate on the equity it deploys.

• Over the past 5 years the stock has returned 252.1%, which puts a lot of weight on the idea that Credicorp can keep putting its capital to work at attractive rates.
• The group relies heavily on how efficiently it converts its balance sheet into profitable lending and fee income, which can shape expectations for future reinvestment opportunities and the level of returns it earns on each extra dollar of capital.
• Prefer to judge Credicorp on earnings? See what Credicorp's 12.9x P/E says about the price.

The issue now is whether the returns Credicorp earns on its capital are strong enough, and sustainable enough, to justify where the share price trades today.

If you want to stress test this same question about the returns companies earn on their capital across a wider universe, take a look at 42 high quality undervalued stocks.

Is Credicorp a Bargain on Excess Returns?

The Excess Returns model values Credicorp by asking how much profit it can earn above its own cost of equity and how much of that can be reinvested. Instead of projecting every cash flow, it looks at the spread between the return on equity and what shareholders require.

For Credicorp, the model uses a Book Value of $480.01 per share and a Stable Book Value of $596.60 per share, linked to an Average Return on Equity of 20.96%. Against a Cost of Equity of $58.67 per share, that produces an Excess Return of $66.40 per share and a Stable EPS input of $125.06 per share based on estimates from analysts. Those inputs, combined with dividend assumptions, lead the Excess Returns framework to an estimated intrinsic value that the model indicates is meaningfully above the current share price of $347.99. Find out what Credicorp could be worth using our Excess Returns estimate.

The Credicorp Narrative: What Would Justify Today's Price?

Narratives pick up where Credicorp's valuation puzzle leaves off by spelling out which paths for future growth, profitability and earnings would need to play out for the stock to be worth materially more or less than it is today on Simply Wall St's Community page. Each scenario links its number to a clear view on how Credicorp's growth, margins and risk profile might evolve, which you can then revisit as fresh information comes through.

Credicorp’s community is split between a digital scale story that sees more value left in the tank and a cautionary view that focuses on higher risk lending and neobank costs.

Bull case: 19% undervalued

"Expansion of Credicorp’s digital financial services like Yape is now tied to a much larger base of more than 16 million monthly active users..."

Discover why this Narrative puts Credicorp at 19% undervalued.

Bear case: 20% overvalued

"The push to grow retail, microfinance and Yape lending faster than the rest of the book concentrates exposure in higher yield segments that also carry structurally higher default risk..."

Explore why this Narrative puts Credicorp at 20% overvalued.

One more Credicorp check that belongs beside the price tag

The last piece worth checking before you lean on any valuation work is who is steering Credicorp and how their pay packets line up with your priorities as a shareholder. See who runs Credicorp and how they are paid.

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