A Look at Bank of Montreal (TSX:BMO) Valuation Following Sector-Wide Canadian Bank Rally

Bank of Montreal (TSX:BMO) stock has moved higher this year as investor appetite for Canadian banks has grown. This shift follows strong quarterly results and steady performance in key business lines.

See our latest analysis for Bank of Montreal.

Canadian banks like BMO have seen renewed momentum, with Bank of Montreal’s share price climbing 28.2% year-to-date as investors respond to a run of strong earnings and robust capital markets activity. With this positive backdrop, BMO’s total shareholder return stands at an impressive 46.7% over the past year, reflecting confidence in both near-term execution and longer-term value.

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With such strong momentum behind BMO, the key question for investors is whether the stock is still undervalued compared to its fundamentals, or if the market has already priced in the bank’s future growth potential.

Most Popular Narrative: 6% Overvalued

Compared to Bank of Montreal’s last close price of CA$179.25, the most widely followed narrative sees the stock as priced above its calculated fair value of CA$168.43. This reflects the market’s optimism but also highlights key factors driving differing opinions on BMO’s true worth.

BMO's continued investment in digital and AI-powered banking platforms, such as the LUMI Assistant and multiple award-winning payment innovations, is improving operational efficiency and customer engagement. This could drive increased net margins and persistently positive operating leverage.

Read the complete narrative.

Want to crack the formula behind this narrative’s price tag? Analysts are betting on platform upgrades and powerful operational shifts; numbers you need to see. Will this momentum fuel the next leap, or is the market already ahead of itself? Dive in to uncover the growth and margin expectations guiding this high-stakes fair value call.

Result: Fair Value of $168.43 (OVERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, slowing economic growth or rising expenses could still threaten BMO’s earnings momentum and weaken the optimism that is driving current valuations.

Find out about the key risks to this Bank of Montreal narrative.

Another View: Cash Flows Tell a Different Story

Digging deeper, the Simply Wall St DCF model points to a different outlook. It estimates Bank of Montreal's fair value at CA$222.26, which is well above the current share price. This method suggests BMO could be undervalued, but does this reflect reality or just the model's optimism?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Bank of Montreal for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Bank of Montreal Narrative

If you want to look beyond the consensus and shape your own story, you can dive into the numbers and develop your own perspective in just a few minutes. Do it your way

A great starting point for your Bank of Montreal research is our analysis highlighting 4 key rewards and 1 important warning sign that could impact your investment decision.

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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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