Is KeyCorp’s Recent 5.6% Rally Backed by Solid Fundamentals?

• Wondering if KeyCorp might be a hidden value pick in today’s banking sector? Let’s dig in together and see if it deserves a spot on your radar.
• The stock has climbed 3.1% in the past week and is up 5.6% over the last month, signaling renewed investor interest and a possible shift in risk appetite.
• Recent headlines highlight industry-wide optimism as key U.S. banks benefit from improved economic outlooks and stabilizing interest rates. KeyCorp in particular has been mentioned for its strategic moves to strengthen its regional footprint and adapt to changing market conditions.
• Right now, KeyCorp scores a 2 out of 6 on our valuation health check. This means it passes two of our six undervalued criteria. Next, we’ll break down the numbers with time-tested valuation approaches, but keep reading for an even more powerful perspective on what truly drives value.

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

Approach 1: KeyCorp Excess Returns Analysis

The Excess Returns model estimates a company’s value by examining how much profit it generates above its cost of equity in relation to its invested capital. This approach is often used for banks because it focuses on returns on equity and how efficiently management can deliver value to shareholders beyond the minimum hurdle rate required by investors.

For KeyCorp, analysts project a stable EPS of $1.83 per share and a book value of $15.82 per share. The weighted average cost of equity is $1.25 per share, resulting in an estimated excess return of $0.59 per share. These estimates are based on projections from 15 analysts for future Return on Equity, which currently averages 10.67%. The stable book value is expected to grow to $17.19 per share, as weighted by forecasts from 14 analysts.

This model suggests that KeyCorp consistently generates returns above its cost of equity, which is viewed positively in the banking sector. According to the model, the stock is estimated to be 42.2% undervalued compared to its intrinsic value, indicating significant upside potential versus recent market pricing.

Result: UNDERVALUED

Our Excess Returns analysis suggests KeyCorp is undervalued by 42.2%. Track this in your watchlist or portfolio, or discover 920 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 KeyCorp.

Approach 2: KeyCorp Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric, especially for profitable companies like banks. It helps investors understand how much they are paying for each dollar of earnings generated by the company. This makes it a useful tool for comparing stocks within the same sector.

The "normal" or fair PE ratio for a bank is not a fixed number. It reflects a company’s growth expectations and risk profile. Companies with faster growth or lower perceived risk tend to have higher PE ratios, while slower growth or higher risk leads to a lower fair multiple.

KeyCorp currently trades at a PE ratio of 21.55x. For context, the average PE ratio among its direct peers is 12.13x, and the industry average for banks is even lower at 11.40x. On the surface, this suggests KeyCorp's shares are trading at a premium compared to both its peers and the broader industry group.

This is where Simply Wall St’s “Fair Ratio” comes in. Unlike simple peer or industry comparisons, the Fair Ratio is a proprietary benchmark that adjusts for nuanced factors such as KeyCorp’s expected earnings growth, risk profile, profit margins, industry classification, and market capitalization. By factoring in these specifics, the Fair Ratio provides a more holistic and accurate representation of what the company should trade at based on its fundamentals.

According to Simply Wall St’s model, KeyCorp’s Fair Ratio is 17.47x. Since the current PE ratio of 21.55x is noticeably higher than the Fair Ratio, this indicates that the stock is trading above what its core fundamentals would justify at present.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1443 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your KeyCorp Narrative

Earlier we mentioned there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is an investor's opportunity to connect KeyCorp’s story by linking what’s happening in the business and banking sector to their own financial forecast, and then to a fair value estimate. Rather than relying solely on traditional ratios or analyst consensus, Narratives let you articulate your perspective: how you think KeyCorp will perform, what future revenue and profits might look like, and what those assumptions mean for the stock’s true worth.

Narratives are not complicated financial models. They are a simple, accessible tool built right into the Simply Wall St Community page, allowing millions of investors to build and share their own investment story. By comparing your Narrative’s fair value with the current market price, you get a direct signal of when you believe buying or selling makes sense, all based on your unique view of the company. Narratives also update automatically when fresh earnings, news, or data become available, helping your investment thesis stay current in a changing market.

For example, some investors believe KeyCorp’s shift toward higher margin business lines and discipline in cost control could drive the stock as high as $43. Others see risks from slowing loan demand and tighter credit conditions, estimating a fair value closer to $16. Your personal Narrative helps you decide which outcome you think is most likely and act accordingly.

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

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com