• If you are wondering whether KeyCorp's current share price offers value, it helps to step back and look at what the market has been pricing in recently.
• The stock last closed at US$22.11, with returns of 0.5% over 7 days, 10.3% over 30 days, 5.4% year to date, 54.2% over 1 year and 22.9% over 5 years. This gives you a sense of how sentiment has shifted over different time frames.
• Recent headlines around KeyCorp have focused on the broader banking sector's funding costs, regulatory scrutiny and investors reassessing regional banks' risk profiles. This context helps explain why the stock's moves have attracted attention from both income focused and value oriented investors.
• KeyCorp currently has a value score of 4/6. This reflects how many of our valuation checks suggest the stock may be priced below their assessed levels. Next you will see how different valuation approaches frame that score, before looking at an even more complete way to think about value later in the article.

Approach 1: KeyCorp Excess Returns Analysis

The Excess Returns model looks at how much profit KeyCorp can generate over and above the return that equity investors are assumed to require, and then capitalizes that stream of “excess” profit into an intrinsic value per share.

For KeyCorp, the model starts with a Book Value of US$16.08 per share and a Stable EPS of US$2.02 per share, based on weighted future Return on Equity estimates from 10 analysts. The Average Return on Equity is 11.80%, while the Cost of Equity is US$1.24 per share. That leaves an Excess Return of US$0.78 per share, which is the gap between what the equity is expected to earn and what investors are assumed to require.

The Stable Book Value is US$17.09 per share, sourced from weighted future Book Value estimates from 11 analysts. Feeding these inputs into the Excess Returns framework produces an estimated intrinsic value of about US$37.40 per share. Compared with the recent share price of US$22.11, this suggests the stock is 40.9% undervalued according to this model.

Result: UNDERVALUED

Our Excess Returns analysis suggests KeyCorp is undervalued by 40.9%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.

Approach 2: KeyCorp Price vs Earnings

For profitable companies, the P/E ratio is a useful gauge because it links what you pay for each share to the earnings that the business is currently generating. It helps you see how much the market is willing to pay for each dollar of profit.

What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk profile. Higher expected growth or lower perceived risk can support a higher multiple, while lower growth expectations or higher risk usually point to a lower one.

KeyCorp currently trades on a P/E of 13.35x. This sits above the Banks industry average of 11.40x, but below the peer group average of 15.61x. The market is therefore pricing it somewhere in the middle of its direct comparisons. Simply Wall St’s Fair Ratio for KeyCorp is 16.35x. This Fair Ratio is a proprietary estimate of what P/E might be appropriate given factors such as earnings growth, profitability, industry, market cap and key risks.

Because the Fair Ratio blends these company specific drivers, it can be more tailored than a simple comparison with peers or the broad industry. With the current P/E of 13.35x sitting below the Fair Ratio of 16.35x, this multiple based view points to the shares looking undervalued on earnings.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your KeyCorp Narrative

Earlier it was mentioned that there is an even better way to think about valuation. Narratives on Simply Wall St let you turn your view of KeyCorp into a clear story that links the business, a financial forecast and a Fair Value. You can then compare that Fair Value with the current price to help you decide whether to buy, hold or sell, all within an easy Community tool that automatically refreshes when new news or earnings arrive. For example, one investor might build a Narrative around a higher Fair Value closer to the more optimistic price targets near US$43 because they focus on loan growth, fee income and capital returns. Another might anchor on a lower Fair Value around US$18 because they are more cautious about funding costs, regulation and credit risk.

For KeyCorp however we will make it really easy for you with previews of two leading KeyCorp Narratives:

Fair value in this bullish narrative: US$24.61 per share

Implied pricing gap vs last close: 10.2% undervalued

Analyst modeled revenue growth: 9.02% a year

• Analysts build a case around a shift in net interest income from headwind to tailwind, supported by fixed asset repricing, swap and treasury maturities and deposit cost management.
• They see noninterest income supported by wealth management, commercial payments and third party commercial loan servicing. Together these are expected to support more stable earnings over time.
• The narrative leans on higher assumed revenue growth, slightly higher profit margins, analyst consensus earnings by 2029 and a P/E of 13.0x to arrive at a fair value above the recent share price.

Fair value in this bearish narrative: US$18.00 per share

Implied pricing gap vs last close: 22.8% overvalued

Analyst modeled revenue growth: 16.37% a year

• Bearish analysts focus on risks around loan remixing toward commercial borrowers, higher ongoing costs from producer hiring and technology spend, and sensitivity to rate paths that could limit net interest margin progress.
• They highlight reliance on fee streams tied to capital markets, commercial mortgage servicing and M&A. These could come under pressure if deal volumes or refinancing activity soften.
• This view assumes a future P/E of 8.8x, a lower fair value of US$18.00 and a scenario where the current share price sits above what the more cautious analyst cohort is comfortable with, despite expecting higher earnings in their model.

If you want to see how other investors are joining these dots across growth, risk and valuation, it is worth checking how the wider community frames KeyCorp using narrative based fair values, alongside your own assumptions about the business.

To see how these results tie into long-term growth, risks, and valuation, check out the full range of community narratives for KeyCorp on Simply Wall St. Add the company to your watchlist or portfolio so you'll be alerted when the story evolves.

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.