Is U.S. Bancorp Fairly Priced After Recent 5% Jump in Shares?

• Ever wondered if U.S. Bancorp's current share price actually gives you great value, or if it's already baked in by the market? You're not alone, and we're about to dig into what the numbers suggest.
• The stock has seen some interesting moves lately, up 5.0% over the last week but still just about flat for the year. This hints that investors are weighing both opportunity and risk.
• Banking stocks have been in the headlines recently as interest rate expectations shift and regulatory changes loom, which can send shares in either direction. For U.S. Bancorp, these macro shifts, along with ongoing discussions about digital banking trends, are adding new twists to its story.
• As for valuation, U.S. Bancorp checks 5 out of 6 boxes indicating it's undervalued, giving it a score of 5/6. However, there's more nuance to the story than just a number. Let's look at how traditional valuation methods stack up while keeping in mind there may be even smarter approaches to value assessment to consider at the end.

Find out why U.S. Bancorp's -7.0% return over the last year is lagging behind its peers.

Approach 1: U.S. Bancorp Excess Returns Analysis

The Excess Returns Model aims to assess value by looking at how efficiently a company puts its capital to work, focusing on the returns generated above the basic cost of equity. In essence, it measures whether U.S. Bancorp can earn more for shareholders than simply investing in a risk-free asset, after taking its cost of capital into account.

For U.S. Bancorp, analysts forecast a stable earnings per share (EPS) of $5.18, sourced from the weighted future Return on Equity estimates of 15 analysts. The company’s book value per share currently stands at $36.32, with an expected stable book value of $40.17, as assessed by 13 analysts. The cost of equity is $3.13 per share, and the company is delivering an excess return of $2.04 per share. Its average future Return on Equity is an attractive 12.89%.

Applying this model, the implied intrinsic value is $85.21 per share. This is a 44.0% discount relative to the current share price, indicating the stock is meaningfully undervalued using this assessment.

Result: UNDERVALUED

Our Excess Returns analysis suggests U.S. Bancorp is undervalued by 44.0%. Track this in your watchlist or portfolio, or discover 922 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 U.S. Bancorp.

Approach 2: U.S. Bancorp Price vs Earnings

The Price-to-Earnings (PE) ratio is widely used for valuing profitable companies like U.S. Bancorp, as it directly relates a company’s current share price to its per-share earnings. For banks and similar established firms, a PE ratio helps investors understand how much they are paying for each dollar of earnings. This makes it a key tool for comparing value among peers.

It is important to remember that what counts as a “normal” or “fair” PE ratio depends on expectations for future growth and the level of business risk. Companies with higher expected growth and lower risk generally warrant a higher PE, while lower growth or higher risk means the PE should be comparatively lower. Comparing U.S. Bancorp’s PE with the industry average and closest peers can serve as a quick sense check, but only tells part of the story.

Currently, U.S. Bancorp trades at a PE of 10.9x. This is just below the average for the Banks industry, which stands at 11.2x, and well below the average PE of its peers at 17.0x. However, Simply Wall St's proprietary “Fair Ratio” builds a much more customized view by weighing earnings growth prospects, market cap, profit margins, and risks. This deeper approach is often more reliable than headline comparisons alone because it tailors the benchmark to U.S. Bancorp’s specific profile. In this case, the Fair Ratio is 13.0x. This suggests that the stock is currently trading below what would be considered fair, indicating potential undervaluation.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1434 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your U.S. Bancorp Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. A Narrative is a user’s unique story or perspective about a company, connecting their assumptions for fair value, future revenue, earnings, and margins with the company’s broader business outlook and industry trends. Rather than relying solely on traditional metrics, Narratives allow you to clearly tie together a company’s story, your financial forecasts, and what you believe its shares are really worth.

With Narratives, available to millions of investors in the Community section on Simply Wall St, you can easily articulate why you think a company is undervalued or overpriced, see how your view compares to others, and make more confident buy or sell decisions based on your Fair Value compared to the current Price. Narratives are kept fresh, dynamically updating when new data such as earnings results or relevant news becomes available, ensuring your investment decisions stay up-to-date in a fast-moving environment.

For example, for U.S. Bancorp, different investors have published Narratives that reflect price targets ranging from as high as $67.0 per share, assuming robust fee momentum and strategic growth, to as low as $47.0 per share, citing risks from digital disruption and regional concentration. This makes it simple to see which story aligns with your outlook before investing.

Do you think there's more to the story for U.S. Bancorp? 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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