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BNY (BNY) Stock Looks Fairly Priced After Its 273% Run

Simply Wall St · 2d ago

Bank of New York Mellon Corporation has delivered a very strong run over the past few years, yet the recent pullback puts a fresh spotlight on whether that track record is supported by the returns it earns on its capital. With the share price now reacting to new capital raising and business developments, the key issue is how today’s valuation lines up with the cash that BNY can generate from the equity it invests in the business.

  • Over the past 3 years, BNY has returned about 272.8%, which puts a lot of weight on the idea that the company’s capital returns can justify such a large move.
  • The recent US$500m share offering may add to BNY’s capital base and can influence future returns on equity depending on how efficiently that extra capital is deployed.
  • If you'd rather focus on earnings, this one's for you. See what Bank of New York Mellon's 16.1x P/E says about the price.

The stock’s next move may depend on whether the returns BNY earns on its capital are strong enough and durable enough to support the current share price.

If you are weighing whether Bank of New York Mellon Corporation’s recent 272.8% three year run is justified by the returns it earns on its capital, it can help to compare that question across 28 high quality undervalued stocks.

Where Does Bank of New York Mellon Sit on Excess Returns?

The Excess Returns model looks at how much profit Bank of New York Mellon Corporation can generate above its equity cost over time. On this view, the key inputs are a book value of $58.82 per share and a stable book value estimate of $66.34 per share, paired with a stable EPS figure of $10.69 per share supported by analyst return on equity estimates. With an average return on equity of 16.11% and a cost of equity of $6.20 per share, the model attributes $4.49 per share to excess return beyond that equity charge.

That combination helps explain why the Excess Returns projections put the estimated intrinsic value broadly in line with the current share price of $142.71. The recent US$500m share offering, and how effectively BNY deploys that extra equity, becomes important because it can either support or dilute those excess returns per share over the next few years. For readers who want to see how this compares across similar stocks, the detailed valuation output is set out in. Find out what Bank of New York Mellon could be worth using our Excess Returns estimate.

The Bank of New York Mellon Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the excess returns puzzle for Bank of New York Mellon Corporation leaves off. They spell out which assumptions on growth, margins and earnings would need to hold for the shares to be worth materially more or materially less than today’s price on the Community page. Each narrative sets out Bank of New York Mellon's fair value as a thesis that can be tracked over time, so you can see how that reasoning holds up as the business and new information evolve.

One of the top community narratives on Bank of New York Mellon: 13% undervalued

"Accelerated investment in digital platforms, including the AI supported platform operating model funded by roughly US$4b of annual engineering spend and hundreds of AI use cases…"

Discover why this Narrative puts Bank of New York Mellon at 13% undervalued.

One more angle on Bank of New York Mellon Corporation worth checking

Valuation only tells part of the story for Bank of New York Mellon Corporation, because the people steering the balance sheet and how they are rewarded can heavily shape what happens next for shareholders. See who runs Bank of New York Mellon 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.