• If you are wondering whether KeyCorp's current share price reflects its underlying value, you are not alone. This article is built to help you make sense of that question in a clear, practical way.
• Over recent periods, the stock has shown mixed returns: about 0.3% over the last week, 1.9% over the past month, 4.2% year to date, 34.9% over 1 year, 42.4% over 3 years and 36.1% over 5 years. These figures may lead some investors to reassess both its potential and its risks.
• Recent news around the U.S. regional banking sector, including ongoing discussions about regulation, funding costs and credit quality, has kept attention on how banks like KeyCorp are positioned. For many investors, that context is an important backdrop when thinking about whether these share price moves align with the bank's fundamentals.
• On our checks, KeyCorp scores 4 out of 6 on valuation, with each point reflecting an area where the stock screens as undervalued. You can see the full breakdown in our 4/6 valuation score. Next, we will walk through the main valuation approaches behind that number and then finish with a way to view valuation that goes beyond any single model.

Approach 1: KeyCorp Excess Returns Analysis

The Excess Returns model looks at how much profit KeyCorp is expected to generate above the return that shareholders require, and then ties that back to what a share could be worth today. Instead of focusing on cash flows, it builds up value from book value, earnings power and the cost of equity.

For KeyCorp, the model starts with a Book Value of $16.22 per share and a Stable EPS estimate of $1.95 per share, based on weighted future Return on Equity estimates from 12 analysts. The average Return on Equity used in the model is 11.32%, compared with a Cost of Equity of $1.23 per share. That gap produces an Excess Return of $0.73 per share, which is then applied to a Stable Book Value of $17.27 per share, also drawn from analyst book value estimates.

Putting these inputs together, the Excess Returns model arrives at an intrinsic value of $36.81 per share. Relative to the current market price, this implies the stock is 40.6% undervalued according to this framework.

Result: UNDERVALUED

Our Excess Returns analysis suggests KeyCorp is undervalued by 40.6%. Track this in your watchlist or portfolio, or discover 54 more high quality undervalued stocks.

Approach 2: KeyCorp Price vs Earnings

For a profitable bank like KeyCorp, the P/E ratio is a practical way to think about what you are paying for each dollar of current earnings. It ties the share price directly to the company’s ability to generate profit, which is usually the main driver of value for established lenders.

What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth potential and risk. Higher expected growth or lower perceived risk can support a higher multiple, while slower growth or higher risk tends to justify a lower one.

KeyCorp currently trades on a P/E of 14.14x. That sits above the Banks industry average of 11.75x, but below the peer group average of 15.16x. Simply Wall St’s Fair Ratio for KeyCorp is 14.93x, which is a proprietary estimate of the P/E you might expect given factors such as its earnings profile, industry, profit margins, market value and risk characteristics. This Fair Ratio can be more informative than a simple peer or industry comparison because it blends these company specific inputs into one benchmark. Compared with the current 14.14x P/E, the 14.93x Fair Ratio suggests the shares are modestly undervalued on this metric.

Result: UNDERVALUED

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Upgrade Your Decision Making: Choose your KeyCorp Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple tool on Simply Wall St’s Community page that lets you connect your view of KeyCorp’s story to specific forecasts and a Fair Value, then compare that Fair Value with today’s price.

In practice, a Narrative is your story behind the numbers, where you plug in assumptions for future revenue, earnings, margins and P/E, and the platform translates that into a Fair Value that updates whenever new information like news or earnings is added.

For KeyCorp, one investor might lean toward a higher Fair Value, such as about US$32.76, because they think revenue growth, profit margins and a future P/E closer to 18.3x are reasonable. Another might prefer a lower Fair Value, such as about US$18.00, using more cautious assumptions and a future P/E of 8.8x. Seeing these side by side helps you decide how today’s price lines up with the story you find most convincing.

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

These are not predictions or recommendations. They are worked examples of how different investors are tying the same data to very different fair values.

Fair value in this bullish narrative: about US$24.45 per share.

That is roughly 10.6% above the recent share price of US$21.86, so the stock screens as about 10.6% undervalued in this scenario.

Revenue growth assumption: 7.91% a year.

• Analysts in this camp focus on earnings resilience, with revenue growth and margin expansion supported by non interest income from wealth management, commercial payments and commercial loan servicing.
• They also factor in potential support from share repurchases, as well as a shift in net interest income from headwind to tailwind as assets reprice and deposit costs are managed.
• Key risks they flag include asset quality, credit conditions, regulation, loan demand and investment banking exposure, which could all affect whether the modelled earnings and valuation are achieved.

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

That is roughly 21.4% below the recent share price of US$21.86, so the stock screens as about 21.4% overvalued in this scenario.

Revenue growth assumption: 16.37% a year.

• The cautious view is that even with solid revenue and earnings assumptions, the market may already be pricing in too much, with the fair value built on a lower 8.8x P/E multiple by 2028.
• This group focuses on sensitivity to commercial demand, fee income tied to capital markets and mortgage servicing, and the possibility that costs stay higher if fee growth slows.
• They also watch for potential constraints on buybacks and capital deployment if credit conditions or capital rules become less favorable, which would limit support for earnings per share.

Seeing these two narratives side by side can help you decide which set of assumptions feels closer to your own view of KeyCorp, and whether today’s price of US$21.86 fits better with the bullish or the bearish story, or somewhere in between.

If you want to test your own view against these examples and see how the market’s story around KeyCorp is evolving, Curious how numbers become stories that shape markets? Explore Community Narratives.

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.