Is UBS a Bargain After Credit Suisse Acquisition and Recent 13.6% Share Price Gain?

• Wondering if UBS Group is a bargain or priced to perfection? Curiosity about where the stock stands on value is at an all-time high.
• Shares have provided a steady return recently, climbing 13.6% over the past year and 8.6% year-to-date, showing both resilience and growth potential.
• Much of this momentum comes after UBS Group’s high-profile acquisition of Credit Suisse, which has shaken up the European banking sector and put UBS in the spotlight. News of ongoing integration updates and industry restructuring continues to keep investors watching closely.
• On the valuation front, UBS Group ticks the “undervalued” box in 3 out of 6 of our core checks, giving it a value score of 3. Next up, we will break down the main valuation methods, along with a fresh perspective on assessing a fair price at the end of the article.

UBS Group delivered 13.6% returns over the last year. See how this stacks up to the rest of the Capital Markets industry.

Approach 1: UBS Group Excess Returns Analysis

The Excess Returns valuation model estimates a company's worth based on how efficiently it generates returns on invested capital above its cost of equity. This approach is particularly relevant for financial institutions like UBS Group, where the ability to earn more on shareholders’ equity than the required return is a sign of strong performance and prudent management.

For UBS Group, analysts forecast a stable earnings per share of CHF3.63 and an average return on equity of 10.92%. This future Return on Equity assessment is built from consensus among 10 analysts. The implied cost of equity is CHF2.96 per share, resulting in a positive excess return of CHF0.67 per share. UBS Group’s projected book value is expected to remain robust, rising to CHF33.24 per share over the long term based on data from 8 analysts.

Based on these assumptions and projections, the Excess Returns model calculates an intrinsic value that suggests UBS Group shares are currently about 6.7% undervalued compared to market price. This indicates the stock is trading close to its fair value, providing current investors reasonable confidence in the pricing.

Result: ABOUT RIGHT

UBS Group 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.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for UBS Group.

Approach 2: UBS Group Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies, reflecting how much investors are willing to pay per unit of earnings. It is best suited for companies like UBS Group with a consistent earnings stream, providing direct insight into how the market values their profitability.

What makes a “normal” or “fair” PE ratio depends on how quickly a company is expected to grow its earnings and the riskiness of those earnings. Companies with stronger growth prospects or more stable profits are often assigned higher multiples by the market, while those considered higher risk or with slower growth trade at a discount.

UBS Group is currently trading at a PE ratio of 16.6x. This is slightly below both the Capital Markets industry average of 17.9x and the peer average of 21.0x, suggesting a modest market discount. However, running a thorough analysis of factors like UBS’s projected earnings growth, profit margins, company size, and risk profile, Simply Wall St arrives at a proprietary Fair Ratio of 25.4x for UBS Group.

The Fair Ratio stands out from industry or peer comparisons as it is custom-calculated for UBS Group. It considers not just sector trends but also UBS’s unique earnings forecast, profitability, market capitalization, and specific risks, offering a more precise benchmark for what the market should pay.

Comparing the actual PE (16.6x) to the Fair Ratio (25.4x), UBS Group appears attractively priced, trading at a notable discount relative to its fundamentals.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1438 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your UBS Group Narrative

Earlier, we mentioned there's an even better way to understand a company's valuation. Let's introduce you to Narratives, a powerful tool that goes beyond the numbers to reveal the story behind a stock’s fair value.

A Narrative is simply your perspective on a business, connecting your expectations for future revenue, earnings, and profit margins to an estimated fair value. It lets you explain why you believe a company like UBS Group is worth a certain price. By linking the company's story to a financial forecast, Narratives help put the numbers into context, making your investment view clear and actionable.

Available on Simply Wall St's Community page, which is used by millions of investors, Narratives are easy to use and help you decide when to buy or sell by letting you compare your Fair Value with today’s market price. When news, earnings, or company events change the outlook, your Narrative can be updated instantly so it always reflects the latest information.

For example, some investors believe UBS Group is worth as much as CHF39.50 due to its global wealth management leadership and ongoing integration of Credit Suisse. Others see risks justifying a value of CHF21.00. This shows that how you interpret UBS Group’s future shapes your investment decisions.

Do you think there's more to the story for UBS Group? Head over to our Community to see what others are saying!

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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