Is BNY Mellon’s Recent 41% Rally Justified After Quarterly Earnings Beat?

Thinking about what to do with Bank of New York Mellon stock right now? You are not alone. Whether you are deciding if it is time to buy, hold, or rethink your investment, the bank's recent performance probably has your attention. After all, the shares have climbed a remarkable 41.5% since the start of the year and are up a whopping 265.5% over five years. Even the last month alone saw a solid 3.7% gain, pushing the latest close to $109.53. This momentum signals renewed investor optimism and may indicate a shift in how the market perceives the company's risks and opportunities.

So, does a rising price mean Bank of New York Mellon is too expensive, or is there still value left on the table? Based on a straightforward value score, which checks for different signs of undervaluation, the company rates a 3 out of 6. That means it is undervalued on half of the metrics that matter most to analysts. This is a decent standing, though it does not suggest a significant bargain.

In the next section, we will break down what kinds of valuation checks are behind that score and how they fit together. If you are looking for something even more insightful than the usual metrics, stay tuned for a smarter perspective on company valuation at the end of the article.

Bank of New York Mellon delivered 56.3% returns over the last year. See how this stacks up to the rest of the Capital Markets industry.

Approach 1: Bank of New York Mellon Excess Returns Analysis

The Excess Returns valuation model examines how much profit a company generates above the minimum expected by its shareholders. In essence, it measures whether Bank of New York Mellon is earning enough on its book value to justify investor confidence, after taking into account the cost of equity.

According to this approach, Bank of New York Mellon's average Return on Equity sits at a healthy 13.48%. The company's Book Value is $54.76 per share, while its Stable EPS (Earnings Per Share) is estimated at $8.10, based on weighted future Return on Equity projections from 9 analysts. The cost of equity, representing the return required by investors, is $5.86 per share. That leaves an Excess Return of $2.24 per share, indicating that the company is able to generate returns in excess of what investors demand. The Stable Book Value estimate is $60.11 per share, as projected by 8 analysts.

Despite these solid figures, the Excess Returns model calculates an intrinsic value that is about 16.8% lower than the current share price. This indicates that Bank of New York Mellon is considered overvalued compared to where its long-term Excess Returns would suggest the price should be.

Result: OVERVALUED

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

Our Excess Returns analysis suggests Bank of New York Mellon may be overvalued by 16.8%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Bank of New York Mellon Price vs Earnings

For established, profitable companies like Bank of New York Mellon, the Price-to-Earnings (PE) ratio is a fitting metric for evaluating valuation. The PE ratio reflects what investors are willing to pay today for a dollar of the company’s current or future earnings. Because profitable companies generate consistent earnings, this ratio offers a straightforward way to gauge whether the stock is priced attractively relative to its core performance.

A "normal" PE ratio is influenced by the company’s growth outlook and risk profile. Higher expected growth and lower perceived risks typically justify a higher multiple, while slower growth and higher risks tend to drag the fair ratio down. Right now, Bank of New York Mellon is trading at a PE ratio of 16.2x. To put this in context, the average across the Capital Markets industry is notably higher at 27.2x, and peer companies average an even loftier 35.1x. On these measures, Bank of New York Mellon appears conservatively valued.

But simple comparisons can mislead, as companies differ in quality and prospects. That is where Simply Wall St’s Fair Ratio comes in. This is a proprietary PE calculation that adjusts for Bank of New York Mellon’s unique combination of growth, profit margin, business risks, industry placement, and market cap. In this case, the Fair Ratio is 16.6x. Because it is tailored to Bank of New York Mellon’s specifics, it gives a more balanced picture than broad industry averages. With the current PE at 16.2x, just below the Fair Ratio, Bank of New York Mellon’s valuation looks about right based on this approach.

Result: ABOUT RIGHT

PE 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 Bank of New York Mellon Narrative

Earlier, we mentioned there is an even better way to understand valuation. Let us introduce you to Narratives. A Narrative is a simple yet powerful way to frame your investment view. It is your story about what the company can achieve, backed by your own assumptions about its future revenue, earnings, margins, and risk, all linked to what you believe is a fair value for the stock.

Unlike rigid formulas or generic ratios, Narratives connect the company’s business story directly to a financial outlook and a dynamic estimate of fair value. This approach enables you to align your buy or sell decisions with realistic scenarios, not just backward-looking metrics, by comparing your Narrative’s fair value to today’s share price.

On Simply Wall St’s Community page, you will find this tool used by millions of investors. It is designed to be quick and intuitive, even if you are not a finance pro, helping you craft, update, and track your investment thesis as new company news or earnings emerge. Narratives respond to fresh information, so your fair value will adjust automatically, keeping your analysis relevant at all times.

For example, some investors think Bank of New York Mellon’s digital assets leadership and efficiency gains will propel earnings, giving it a fair value as high as $113 per share. More cautious users see risks from fee pressure and margin uncertainty, estimating fair value closer to $85. Narratives make it easy for you to see, understand, and challenge these views so you can make smarter, more confident decisions.

Do you think there's more to the story for Bank of New York Mellon? 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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