Is Bank of New York Mellon Corporation (BK) Still Reasonably Priced After Its Strong Run
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Wondering if Bank of New York Mellon Corporation is still priced reasonably after its strong run, or if you might be paying too much for each US$1 of earnings today?
BNY’s share price closed at US$117.74, with a 5.3% decline over the last 7 days and a 3.0% decline over 30 days. The 1 year return sits at 36.9%, the 3 year return at 148.5% and the 5 year return at 220.4%.
Recent news around BNY has centered on its role as a major custodian bank and its position in global capital markets. This often draws attention when risk sentiment shifts and can influence how investors think about its earnings resilience and balance sheet strength.
On our framework, BNY currently scores a 4 out of 6 valuation score. Next, we will look at how different methods like DCFs, P/E and P/B multiples compare, before finishing with a broader way to think about what that score means for you.
The Excess Returns model looks at how much profit a company is expected to generate above the return that equity investors require, and then capitalizes those extra profits into an estimated intrinsic value per share.
For BNY, the analysis starts with a Book Value of US$57.36 per share and a Stable EPS of US$9.54 per share, based on weighted future Return on Equity estimates from 8 analysts. The Average Return on Equity is 14.70%, while the Cost of Equity is US$6.08 per share, which implies an Excess Return of US$3.47 per share. Stable Book Value is put at US$64.91 per share, again based on analyst estimates.
Using these inputs, the Excess Returns model arrives at an intrinsic value of about US$123.15 per share. Compared with the recent share price of US$117.74, this suggests the stock is roughly 4.4% below the model’s estimate of intrinsic value, which sits within a typical margin of error for valuation work.
Result: ABOUT RIGHT
Bank of New York Mellon is fairly valued according to our Excess Returns, but this can change at a moment’s notice. Track the value in your watchlist or portfolio and be alerted on when to act.
For a profitable company like Bank of New York Mellon Corporation, the P/E ratio is a useful way to gauge what the market is currently willing to pay for each dollar of earnings. It links the share price directly to earnings, which tend to be a key driver of long term returns for many investors.
A higher or lower P/E ratio often reflects what the market expects for future growth and how risky those earnings are perceived to be. Higher growth or lower perceived risk can support a higher “normal” P/E, while slower growth or higher risk can justify a lower one.
BNY is trading on a P/E of 15.27x, compared with the Capital Markets industry average of 23.12x and a peer group average of 23.75x. Simply Wall St’s Fair Ratio for BNY is 16.92x, which is its proprietary estimate of what a reasonable P/E could be given factors such as earnings characteristics, industry, profit margins, market cap and risk profile.
This Fair Ratio can be more tailored than a simple comparison to peers or the broad industry, because it adjusts for company specific features rather than assuming one size fits all. With the current P/E below the Fair Ratio, BNY screens as undervalued on this metric.
Earlier we mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St’s Community page let you connect your view of Bank of New York Mellon Corporation’s story to a set of revenue, earnings and margin forecasts, turn that into your own Fair Value, and then compare it to the current price so you can decide whether the gap looks attractive. You can see that view update automatically as fresh news or earnings come in, and understand why one investor might plug in a higher fair value of US$132.60 based on things like AI and stablecoin initiatives, while another anchors closer to US$85 because they focus more on risks such as fee pressure or digital disruption.
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.
