Do Recent Office Return Mandates Signal a New Phase for HSBC Shares in 2025?

Thinking about what to do with your HSBC Holdings stock? You are definitely not alone. Whether you are a seasoned investor or just looking for strong performers, HSBC's moves over the past year have been hard to ignore. With its stock recently closing at 9.698 and notching a one-year return of 55.3%, there is plenty of action here to catch your eye. Even more impressive, the stock is up 23.8% year-to-date and an astonishing 303.9% over five years. It is clear that the market is taking notice of changes at HSBC, and the story behind this momentum is worth a closer look.

Recent headlines have thrown plenty of variables into the mix. From directors and staff being asked to return to the office four days a week to a cyberattack on its Brazilian operations, investors have had no shortage of news to digest. Each of these developments might alter the market’s thinking about HSBC’s long-term growth and risk. However, so far it seems investor confidence is holding firm, with steady gains over both the short and long term. A value score of 2 (out of a possible 6) suggests the stock may be undervalued in a couple of areas, which may indicate it is not a screaming bargain, but possibly not fully priced either.

With that in mind, let’s break down how valuation experts might look at HSBC. We will dig into the most common checks investors use to decide if the stock is a great buy, fairly priced, or something to watch from the sidelines. And at the end, I will share a perspective that goes beyond the standard playbook.

HSBC Holdings scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: HSBC Holdings Excess Returns Analysis

The Excess Returns valuation model centers on how much return a company generates above its cost of equity. In other words, it measures the profitability of HSBC’s investments relative to what investors require as a minimum return for owning the company’s equity. This model helps reveal whether HSBC truly adds value for its shareholders or merely covers its cost of capital.

For HSBC Holdings, the numbers are strong. Current estimates point to a Book Value of £9.88 per share and a Stable EPS (Earnings Per Share) of £1.46, based on a consensus from 17 analysts. The Cost of Equity is £0.92 per share, resulting in an Excess Return of £0.54. Across the next several years, analysts expect a Stable Book Value of £10.88 per share, as projected by 7 analysts. HSBC’s average Return on Equity stands at an impressive 13.40%, indicating efficient use of its equity base to generate profits.

According to this model, the estimated intrinsic value for HSBC Holdings is £14.99 per share. With the current market price at £9.70, the stock appears 35.3% undervalued by this method. This notable discount suggests there may be an opportunity for investors looking for value.

Result: UNDERVALUED

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

Our Excess Returns analysis suggests HSBC Holdings is undervalued by 35.3%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: HSBC Holdings Price vs Earnings

The price-to-earnings (PE) ratio is commonly used to value profitable companies because it directly relates the market’s valuation to the company's earnings power. For businesses like HSBC Holdings, which have a consistent track record of generating profits, the PE ratio offers a straightforward way to understand whether the stock’s price reflects its earnings potential.

It is important to note that a "normal" or "fair" PE ratio is not the same for every company, even within the same sector. Higher growth expectations, lower risk, and superior profit margins usually justify a higher PE ratio. Conversely, lower growth prospects, higher risk, and weaker margins tend to result in a lower PE. This means you cannot judge a company solely by its multiple without considering these underlying drivers.

HSBC’s current PE ratio stands at 12.7x. When measured against key benchmarks, this is higher than the peer average of 9.6x and also above the banking industry average of 10.4x. Simply Wall St’s Fair Ratio for HSBC, which accounts for earnings growth, industry positioning, profit margins, company size, and risk factors, is calculated at 9.1x. The Fair Ratio offers a more holistic valuation than the industry or peer averages alone because those can overlook a company’s unique strengths or vulnerabilities that truly affect fair value.

With HSBC’s current PE (12.7x) being substantially higher than its Fair Ratio (9.1x), this suggests the stock is trading at a premium and may be overvalued relative to its fundamentals.

Result: OVERVALUED

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

Upgrade Your Decision Making: Choose your HSBC Holdings Narrative

Earlier, we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is your own story or outlook on a company, helping you connect the actual facts, such as expected revenue, earnings, and margins, to your forecast of fair value.

Narratives are more than just numbers. They let you add your viewpoint to a company’s data: why you believe certain trends or assumptions (such as digital transformation or exposure to Asia) will drive value, and how this shapes your forecast. Narratives start with the company’s story, flow through your financial expectations, and end by generating a fair value, all in one place.

Accessible directly through Simply Wall St’s Community page, Narratives are a simple, dynamic decision-making tool used by millions of investors. They help you decide when to buy or sell by comparing your calculated fair value to the current market price, and they automatically update as new news or earnings reports come in.

For example, with HSBC Holdings, some investors may be optimistic about Asian wealth management and set a high value, while others, concerned about real estate and cost risks, estimate a much lower price target.

Do you think there's more to the story for HSBC Holdings? Create your own Narrative to let the Community know!

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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