Is It Too Late To Consider PNC After Its Strong Multi Year Share Price Gains?

• If you are wondering whether PNC Financial Services Group at around $202 a share is still good value, or if the easy gains are already behind it, you are not alone. That is exactly what this breakdown is here to unpack.
• The stock has climbed 2.1% over the last week and 9.2% in the past month, building on a 52.5% gain over three years and 66.7% over five years. This naturally raises the question of how much upside might be left.
• Recent moves have been shaped by a steadier outlook for interest rates and ongoing optimism around US regional banks. PNC is often cited as one of the better capitalized, more conservatively run franchises in the space. At the same time, tighter banking regulation and a more cautious lending environment have kept a lid on sentiment, which helps explain why the share price has been grinding higher instead of surging.
• Right now, PNC scores a 4/6 valuation check score, suggesting it screens as undervalued on several, but not all, of our metrics. In the next sections we will walk through those valuation approaches, before finishing with a more holistic way to think about what the market is really pricing in.

Find out why PNC Financial Services Group's 3.1% return over the last year is lagging behind its peers.

Approach 1: PNC Financial Services Group Excess Returns Analysis

The Excess Returns model looks at how efficiently a company turns its shareholders' equity into profits above its cost of capital, then capitalizes those surplus returns into an intrinsic value per share.

For PNC Financial Services Group, the starting point is a Book Value of $135.67 per share and a Stable EPS of $18.36 per share, guided by future return on equity estimates from 13 analysts. With an Average Return on Equity of 12.31% and a Cost of Equity of $11.12 per share, the model estimates an Excess Return of $7.24 per share, suggesting PNC can consistently earn more than its investors require.

As book value compounds toward a Stable Book Value of $149.18 per share, based on estimates from 11 analysts, those excess returns are projected forward and discounted back to today to arrive at an intrinsic value of about $321.92 per share. Relative to the current share price around $202, this implies the stock is roughly 37.2% undervalued on this measure.

Result: UNDERVALUED

Our Excess Returns analysis suggests PNC Financial Services Group is undervalued by 37.2%. Track this in your watchlist or portfolio, or discover 895 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for PNC Financial Services Group.

Approach 2: PNC Financial Services Group Price vs Earnings

For a consistently profitable bank like PNC Financial Services Group, the price to earnings, or PE, ratio is a useful shorthand for how much investors are willing to pay for each dollar of current earnings. In general, higher growth prospects and lower perceived risk can justify a higher PE multiple, while slower growth or greater uncertainty usually pull that multiple down.

PNC currently trades on a PE of about 12.9x, which is slightly above the broader Banks industry average of around 11.6x, but below the average of its closer peers at roughly 17.9x. To move beyond these blunt comparisons, Simply Wall St uses a Fair Ratio, which estimates what a reasonable PE should be once the company’s earnings growth outlook, profitability, risk profile, industry characteristics and market cap are taken into account.

Because this Fair Ratio of 14.1x is tailored to PNC’s specific fundamentals, it is a more nuanced yardstick than raw peer or industry averages. Comparing it to the current 12.9x indicates that the market is pricing PNC below the level that its earnings profile would typically support.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your PNC Financial Services Group Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple way to tie your view of PNC Financial Services Group’s future to hard numbers like revenue, earnings, margins and ultimately a fair value estimate.

A Narrative is your story about a company, captured as assumptions about how fast it can grow, how profitable it can be and what multiple the market might pay. These assumptions then flow into a financial forecast and a clear Fair Value that you can compare to today’s price to decide whether to buy, hold or sell.

On Simply Wall St’s Community page, millions of investors can build and share Narratives that automatically update when new information arrives, such as earnings results or major news. This means your fair value view evolves in real time instead of going stale.

For example, a bullish Narrative on PNC may assume revenue grows nearer the top of analyst ranges with expanding margins and a higher future PE, justifying a Fair Value closer to $238. A more cautious Narrative might lean on slower growth, slightly tighter margins and a lower multiple, landing nearer $186 and leading to very different decisions at a share price around $200.

Do you think there's more to the story for PNC Financial Services Group? Head over to our Community to see what others are saying!

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.

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