Is It Too Late To Consider First Horizon After Its Strong Multi Year Share Price Gains

• Wondering if First Horizon is still good value after its recent run up, or if the easy money has already been made? Here is the context so you can decide whether the current price actually makes sense.
• The stock has quietly climbed 1.9% over the last week, 5.8% over the past month, and is up 13.8% year to date, adding to a 110.0% gain over the last 5 years that has caught more investors' attention.
• These moves are coming as regional bank sentiment improves and investors refocus on balance sheet strength and capital returns in the sector. At the same time, shifting expectations around interest rates and credit risk are changing how the market prices banks like First Horizon.
• Right now, First Horizon scores just 2 out of 6 on our undervaluation checks. Below, we break down what different valuation models say about the stock, and then wrap up with a more powerful way to think about its true value beyond any single metric.

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

Approach 1: First Horizon Excess Returns Analysis

The Excess Returns model looks at how much profit a bank can generate above the return that shareholders require, based on its equity base. Instead of focusing on cash flows, it measures how efficiently First Horizon turns its book value into earnings over time.

For First Horizon, the model starts with a Book Value of $17.19 per share and a Stable EPS of $2.05 per share, sourced from weighted future Return on Equity estimates from 10 analysts. With an Average Return on Equity of 10.90% and a Stable Book Value projected to rise to $18.80 per share, the bank is modeled to keep generating solid profitability on its equity base.

The Cost of Equity is estimated at $1.54 per share, so the bank is modeled to earn an Excess Return of $0.51 per share above what investors require. When these excess returns are projected forward and discounted, the model arrives at an intrinsic value of about $29.10 per share. Under this model, the stock appears to be roughly 21.8% undervalued versus the current price.

Result: UNDERVALUED

Our Excess Returns analysis suggests First Horizon is undervalued by 21.8%. Track this in your watchlist or portfolio, or discover 906 more undervalued stocks based on cash flows.

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

Approach 2: First Horizon Price vs Earnings

For a profitable bank like First Horizon, the price to earnings, or PE, ratio is a useful way to judge valuation because it directly links what investors pay today to the earnings power the business is already generating.

In general, faster earnings growth and lower perceived risk justify a higher PE multiple, while slower growth or higher risk usually mean the stock should trade on a lower PE. That is why comparing PE ratios without context can be misleading.

First Horizon currently trades on a PE of about 13.09x, which is above both the Banks industry average of roughly 11.64x and the peer average of around 10.80x. At face value, that suggests the market is already paying a premium for the stock.

Simply Wall St’s Fair Ratio, at 12.63x, estimates the PE that makes sense for First Horizon once its earnings growth profile, risk, profitability, industry and market cap are all factored in. This tailored benchmark is more robust than a simple comparison to peers or the sector, which may have very different fundamentals.

With the current PE only slightly above the Fair Ratio, First Horizon appears to be priced close to what its earnings suggest.

Result: ABOUT RIGHT

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Upgrade Your Decision Making: Choose your First Horizon Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. This is a simple tool on Simply Wall St’s Community page where you connect your view of a company’s story to a set of forecasts and a Fair Value, then compare that to the current share price to help decide whether to buy, hold, or sell. These Narratives update automatically when new earnings or news arrive. For First Horizon, one investor might build a bullish Narrative around disciplined deposit costs, a $1.2 billion buyback, steady mid single digit revenue growth, and a Fair Value near the top analyst target of about $27. A more cautious investor might instead focus on recession risk, rising charge offs, and limited near term catalysts, leading them to a lower Fair Value closer to $22. Both perspectives coexist transparently so you can see the assumptions behind each story rather than relying on one static metric.

Do you think there's more to the story for First Horizon? 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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