Is KeyCorp Poised for a Rebound After Recent 7.9% Drop?

If you have been watching KeyCorp’s stock lately, you are probably wondering whether now is the right moment to buy, hold, or step back. It has been a bumpy ride in the last month, with the stock sliding 7.9% over 30 days and finishing the past week down another 5.3%. On the other hand, investors who zoom out to a longer timeline still see a 5-year return of 74.8%, which is impressive by any measure. Year to date, KeyCorp is holding on to a modest 3.4% gain, showing resilience even as broader market uncertainties and shifting financial sector sentiment keep traders on their toes.

So, what is driving these moves? Much of the recent volatility seems tied to changing expectations in the banking sector and evolving interest rate forecasts, which can swing sentiment quickly for a bank like KeyCorp. It is easy to see why risk perception is shifting, but behind every price swing lies the question: is the stock actually undervalued, or fairly priced given the current environment?

This brings us to a key piece of the puzzle. KeyCorp scores 3 out of 6 on our valuation checklist, landing solidly in undervalued territory for half the metrics we use to spot bargains. For investors, those numbers grab attention, but are only part of the story.

Let us dig into the different ways analysts measure value in a stock like KeyCorp, and keep reading for a perspective on valuation that goes beyond the standard checklist.

Why KeyCorp is lagging behind its peers

Approach 1: KeyCorp Excess Returns Analysis

The Excess Returns model looks at how much profit a company can generate over and above its cost of equity, showing whether management is putting shareholders' money to effective use. This approach highlights sustained value creation rather than just one-time windfalls.

For KeyCorp, the numbers paint a clear picture. The book value stands at $15.27 per share, with an expected stable earnings per share (EPS) of $1.73 going forward. These expectations are built from weighted future Return on Equity estimates from 14 analysts, giving added credibility to the projections. Meanwhile, the estimated cost of equity is $1.23 per share, leading to an excess return of $0.50 per share. On average, KeyCorp’s estimated Return on Equity is 10.30%, and the stable book value is expected to reach $16.77 per share, again based on analyst consensus.

By running these numbers through the model, the intrinsic value for KeyCorp stock is calculated at $28.52 per share. Compared to current market prices, this implies the stock is trading at a 38.4% discount, suggesting it is significantly undervalued, at least by this method. For investors who prioritize excess capital generation, KeyCorp stands out as attractive on this measure.

Result: UNDERVALUED

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

Our Excess Returns analysis suggests KeyCorp is undervalued by 38.4%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: KeyCorp Price vs Book

For established banks like KeyCorp, the price-to-book (PB) ratio is often considered the gold standard for valuation. Unlike earnings, which can be volatile due to short-term market swings or non-recurring items, the book value of a bank’s assets offers a more stable foundation for analysis. The PB ratio is particularly meaningful for profitable companies in the financial sector because it measures how much investors are paying for each dollar of the company’s net assets.

Growth expectations and risk are key factors that determine what a "normal" or "fair" PB ratio should be. Banks that reliably grow book value or generate high returns on equity typically deserve a PB ratio higher than peers, while those with riskier loan portfolios or unstable earnings may trade at a discount.

Currently, KeyCorp is trading at a PB ratio of 1.13x, which is slightly above the industry average of 1.02x but below the peer average of 1.50x. This suggests that the market values KeyCorp’s underlying assets more highly than the broader industry, but less optimistically than its closest peers. To go a step further, Simply Wall St calculates a proprietary “Fair Ratio,” a more dynamic benchmark that incorporates not just industry comparisons, but also factors like growth rates, risk levels, profit margins, market capitalization, and sector influences. This customized Fair Ratio produces a more holistic and nuanced view of valuation than simple peer or sector averages can offer.

Comparing KeyCorp’s actual PB ratio to its Fair Ratio provides the most direct insight into its current pricing. In this case, the gap suggests the current PB multiple is close to what our Fair Ratio predicts, so the stock is neither notably cheap nor expensive on this measure.

Result: ABOUT RIGHT

PB 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 KeyCorp Narrative

Earlier we mentioned there is an even better way to understand valuation, so let us introduce you to Narratives. Simply put, a Narrative is your personalized story about a company; it is how you combine your view of a business’s prospects with numbers like future revenue, earnings, or profit margins, leading to your own fair value estimate.

Narratives make the investment process more dynamic and approachable by linking a company’s story directly to a financial forecast, and then bringing it all together with a calculated fair value. This isn't a complex tool for experts; it is an easy and accessible feature, available on Simply Wall St’s Community page and used by millions of investors to share and discuss perspectives.

With a Narrative, you can instantly see whether your version of KeyCorp’s story, or anyone else’s, signals to buy or sell by comparing your calculated Fair Value to the current Price. Best of all, Narratives update in real time as new information, like quarterly results or major news, is released, ensuring that your story and valuation are never stale.

For example, one investor’s Narrative for KeyCorp, based on an optimistic outlook, sees a fair value as high as $43 per share, while a more cautious view lands closer to $16. This demonstrates that everyone’s story (and thus, valuation) can be different.

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