Is HSBC (LSE:HSBA) Still Undervalued After Its Strong Recent Share Price Rally?

HSBC Holdings (LSE:HSBA) has quietly built momentum this year, with the share price up roughly 42% year to date and total return near 55% over the past year, outpacing many global banks.

See our latest analysis for HSBC Holdings.

That run has been underpinned by solid earnings momentum and rising profitability, with the latest 90 day share price return of 9.56% and a three year total shareholder return of 175.93% suggesting bullish sentiment is still building around the $11.118 stock.

If HSBC’s rally has you thinking beyond big banks, it could be a good moment to see what else is gaining traction via fast growing stocks with high insider ownership.

Yet with the shares now trading above analyst targets but still showing a hefty intrinsic discount, the key question is whether HSBC remains undervalued or if the market is already pricing in its next phase of growth.

Most Popular Narrative: 4.7% Overvalued

With HSBC Holdings last closing at £11.12 against a narrative fair value of about £10.62, the current share price already runs ahead of that central estimate, setting up a debate around how much future growth is being brought forward.

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, will generate structural cost reductions (organizational simplification savings), directly improving the cost to income ratio and lifting long term operating leverage and net margins.

Read the complete narrative.

Want to see how steady revenue expansion, rising margins and a richer earnings multiple all fit together into that fair value math? The narrative leans on bold efficiency gains, ambitious profitability targets and a long runway for capital redeployment, but the exact assumptions behind those projections might surprise you.

Result: Fair Value of $10.62 (OVERVALUED)

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

However, sustained Hong Kong property weakness, or sharper than expected Asian macro and regulatory headwinds, could easily derail those margin and earnings ambitions.

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

Another Angle on Valuation

While the narrative fair value suggests HSBC is about 4.7% overvalued, its current price to earnings ratio of 15.4 times versus a European banks average of 10.5 times and a fair ratio of 10.2 times points to a much richer valuation that could cap upside if sentiment cools.

See what the numbers say about this price — find out in our valuation breakdown.

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 915 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 story differently, or would rather dig into the numbers yourself, you can spin up a tailored narrative 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.

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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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