HSBC (LSE:HSBA): Has the Recent Share Price Surge Left the Bank Overvalued?

Why HSBC Holdings (LSE:HSBA) Is Back on Investors’ Radar

HSBC Holdings (LSE:HSBA) has quietly delivered a solid mix of income and growth, with shares up about 7% over the past 3 months and roughly 50% over the past year.

See our latest analysis for HSBC Holdings.

Recent moves in HSBC’s share price have been relatively muted in the short term. However, that follows a powerful run, with a roughly 36% year to date share price return and a 50% one year total shareholder return suggesting momentum is still firmly on the side of long term holders.

If HSBC’s run has you thinking about where capital could compound next, it is worth scanning fast growing stocks with high insider ownership for other fast growing businesses where management has meaningful skin in the game.

But after such a strong run and only a small discount to analyst targets, is HSBC still trading below its intrinsic value, or are investors now fully pricing in its future growth potential?

Most Popular Narrative: 0.6% Overvalued

With the current share price slightly above the narrative fair value of £10.62, the story hinges on how earnings, margins, and capital allocation evolve.

The strategic shift away from underperforming and non-core businesses in Europe and the Americas, and redeployment of capital into high-return businesses in Asia and the Middle East, is expected to improve overall net interest margins and boost group return on equity through better allocation of resources. Disproportionate investment in digital transformation, including AI-driven efficiency gains and digital onboarding, is described as a driver of structural cost reductions (organizational simplification savings), which would directly improve the cost-to-income ratio and support long-term operating leverage and net margins.

Read the complete narrative.

Curious how modest revenue growth, rising margins and a lower future earnings multiple can still justify today’s price premium? The full narrative unpacks the math behind that tight valuation gap.

Result: Fair Value of £10.62 (OVERVALUED)

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

However, that tight valuation could quickly unravel if Hong Kong commercial real estate weakens further or if Asian growth and rate dynamics turn less supportive.

Find out about the key risks to this HSBC Holdings narrative.

Another Lens on Value

Our DCF model tells a very different story, suggesting HSBC’s shares are trading about 36% below an estimated fair value of £16.77. If cash flows really deserve that price, is the tight analyst target too cautious, or is the model overestimating resilience?

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 HSBC Holdings 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 893 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 HSBC Holdings Narrative

If you see the numbers differently or just prefer hands on research, you can build a personalised HSBC story in minutes: Do it your way.

A great starting point for your HSBC Holdings research is our analysis highlighting 2 key rewards and 3 important warning signs that could impact your investment decision.

Looking for your next investment moves?

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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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