KeyCorp (KEY) is back in focus as investors look ahead to its second quarter earnings. Forecasts point to a profit of $0.43 per diluted share and a 22.9% year over year EPS increase.

KeyCorp’s recent momentum has been building, with a 30 day share price return of 8.53% and a 90 day gain of 15.46%. The 1 year total shareholder return of 38.51% and 3 year total shareholder return of around 18x suggest earnings expectations are playing a key role in how the stock is being priced.

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With KeyCorp trading at $23.15, sitting around 9% below the average analyst price target and with an estimated intrinsic discount of about 38%, investors now have to ask: is there real value here, or is the market simply pricing in future growth?

Most Popular Narrative: 8.2% Undervalued

On the most followed view of KeyCorp, a fair value of about $25.22 sits above the recent $23.15 close, putting the current price at a discount to that narrative.

The anticipated shift from net interest income (NII) headwinds to tailwinds due to a pivot in fixed asset repricing and the structure of swap and treasury maturities, expected to significantly enhance NII in the forthcoming quarters, impacting revenue growth positively.

Want to see why this fair value leans higher than today’s share price? The narrative leans heavily on changing interest income, steadier margins, and a specific earnings runway that is not obvious from headline numbers alone.

Result: Fair Value of $25.22 (UNDERVALUED)

However, there are still clear pressure points for KeyCorp, including higher nonperforming loans and potential increases in regulatory capital requirements that could limit shareholder returns.

Another View: What Multiples Say About KeyCorp

While the most followed narrative frames KeyCorp as about 8.2% undervalued, the current P/E of 13.9x sits above both the US Banks industry average of 12.3x and the fair ratio of 13.7x. That small premium suggests the margin of safety may be tighter than headline fair values imply, so how comfortable are you with that trade off?

Next Steps

If this KeyCorp story sounds promising but incomplete, consider acting while the data is fresh and test the thesis against your own criteria with 4 key rewards

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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.