Cullen Frost Bankers (CFR) Stock Could Still Look Reasonable After Its 90% Run

Cullen/Frost Bankers has delivered a strong share price run in recent years, which naturally pushes investors to ask whether that climb is backed by the returns the bank earns on its capital. With the stock now trading around US$162, the key issue is how well that price lines up with what the business is actually generating for its shareholders.

• Over the past 3 years the stock has returned about 89.6%, putting real weight on the question of whether the bank's capital returns are pulling their weight behind that move.
• The franchise leans heavily on a traditional banking model that depends on how effectively management can convert its deposit base and loan book into consistent returns on equity and invested capital, which in turn shapes how much value current shareholders may be paying for today.
• If you'd rather focus on earnings, this one's for you. See why Cullen/Frost Bankers's 15.1x P/E tells a different valuation story.

The issue now is whether Cullen/Frost Bankers' current share price is adequately supported by the returns it earns on the capital entrusted to it.

If you want to test the same question about returns on capital across a broader set of ideas, take a look at 34 high quality undervalued stocks.

Is Cullen/Frost Bankers Still Cheap on Excess Returns?

The Excess Returns model looks at what Cullen/Frost Bankers earns on shareholder capital above its estimated cost. For this bank, the framework leans heavily on how efficiently it can turn book equity into ongoing earnings, since that is what ultimately underpins the current US$162.16 share price.

Analysts currently anchor the Excess Returns inputs on a Book Value of US$72.04 per share and a Stable Book Value of US$78.78 per share. The model uses a Stable EPS of US$11.92 per share, based on future Return on Equity estimates from 12 analysts, against a Cost of Equity of US$5.70 per share. That spread feeds an estimated Excess Return of US$6.22 per share, with an Average Return on Equity of 15.13%, which is higher than the equity charge implied in the model. Taken together, the Excess Returns framework points to an estimated intrinsic value that sits substantially above where Cullen/Frost Bankers is trading today. Find out what Cullen/Frost Bankers could be worth using our Excess Returns estimate.

The Cullen/Frost Bankers Narrative: What Would Justify Today's Price?

Narratives for Cullen/Frost Bankers pick up where the excess returns puzzle leaves off by setting out what pattern of future growth, profitability and earnings power would need to play out for the current valuation to look either stretched or conservative, on Simply Wall St's Community page. Instead of a single output from a ratio or valuation model, they unpack the assumptions that sit underneath it so you can watch how reality compares over time.

One of the top community narratives on Cullen/Frost Bankers: 7% undervalued

"Analysts expect earnings to reach $707.1 million (and earnings per share of $12.18) by about September 2029…"

Discover why this Narrative puts Cullen/Frost Bankers at 7% undervalued.

Before you act on Cullen/Frost Bankers' valuation, there is one more angle to check

The figures only tell part of the story for Cullen/Frost Bankers, because the people setting priorities, taking risk and rewarding themselves can strongly shape how those numbers evolve over time. See who runs Cullen/Frost Bankers and how they are paid.

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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