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Cullen Frost Bankers (CFR) Stock Still Seems Undervalued After Strong Run

Simply Wall St · 2d ago

Cullen/Frost Bankers has delivered a strong share-price run in recent years, which naturally raises a question for new and existing holders. Is the current valuation fully supported by the returns the bank earns on the capital it puts to work?

  • Over the past 3 years the stock has gained 89.3%, which puts real weight on whether the underlying returns on equity and invested capital are carrying that move.
  • The business leans heavily on relationship banking and a relatively conservative balance sheet, which can shape how efficiently each dollar of capital is turned into earnings and eventually shareholder value.
  • If you'd rather focus on earnings, this one's for you. See why Cullen/Frost Bankers's 14.5x P/E tells a different valuation story.

The issue now is whether Cullen/Frost Bankers' current share price is justified by the returns it earns on its capital.

To benchmark Cullen/Frost Bankers' recent 3 year share-price run against similar quality-focused stories, it can help to compare it with companies in the 31 resilient stocks with low risk scores.

Is Cullen/Frost Bankers a Bargain on Excess Returns?

The Excess Returns model looks at how much value Cullen/Frost Bankers creates over and above the return investors demand on its equity. Here the key inputs are the balance sheet and the earnings power that balance sheet can support over time.

Book Value is estimated at $72.04 per share and the stable book value is projected at $79.09 per share, which frames how much equity the bank can put to work. Against that base, the model uses a stable EPS estimate of $12.09 per share, sourced from weighted future Return on Equity estimates from 12 analysts, and an average Return on Equity of 15.28%. With a Cost of Equity of $5.72 per share and an excess return of $6.36 per share, the output suggests Cullen/Frost Bankers' excess returns profile supports an intrinsic value that sits substantially above the current share price of $156.21. 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?

Simply Wall St Narratives pick up where the valuation puzzle for Cullen/Frost Bankers leaves off by spelling out which paths for growth, profitability and earnings would need to play out for the shares to be worth materially more or materially less than today. Each scenario ties a fair value to a particular mix of potential catalysts and risks, so you can watch over time which storyline seems closest to how Cullen/Frost Bankers' business actually unfolds on the Community page.

One of the top community narratives on Cullen/Frost Bankers: 11% undervalued

"The current valuation implies the share price does not fully reflect Cullen/Frost Bankers’ earnings guidance, dividend track record, and the scale of its Texas franchise…"

Discover why this Narrative puts Cullen/Frost Bankers at 11% undervalued.

Cullen/Frost Bankers’ price is only part of the story

Before making any call on Cullen/Frost Bankers, it helps to ask who is steering the bank and whether their incentives truly line up with long term shareholders. 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.