Truist Financial has put up a strong share price run over the past three years, yet the stock still screens as undervalued on both its intrinsic value checks and its market multiples. With several business changes underway, including shifts in lending and leadership in wealth management, investors are weighing whether the current price fully reflects those signals.

• Truist Financial has returned 88.5% over the past three years, which puts the recent share price firmly in focus for valuation minded investors.
• The refocus away from certain consumer loan portfolios and the appointment of a new head for Truist Wealth can support a more profitable business mix over time, although changes in lending exposure may also alter the bank's risk profile if execution falls short.
• On Simply Wall St's broader checks, Truist Financial is assessed as undervalued in 5 of 6 areas, which points to a market price that sits below the current intrinsic value estimate.

The issue now is whether Truist Financial's recent gains have already captured this apparent undervaluation or if there is still a meaningful discount left in the stock.

Is Truist Financial a Bargain on Excess Returns?

The Excess Returns model for Truist Financial looks at how much profit the bank is expected to generate above its cost of equity. On this view, Truist Financial starts from an estimated Book Value of $48.04 per share and a Stable EPS of $5.05 per share, based on analyst projections for future return on equity. With a Cost of Equity of $4.06 per share, the implied Excess Return of $0.98 per share and an Average Return on Equity of 9.75% point to value being created on top of the capital invested in the business.

Rolling those excess returns forward and anchoring them to a Stable Book Value of $51.73 per share gives an intrinsic value estimate of $74.50 per share. That sits above the current share price, which implies the stock trades at roughly a 28.9% discount. Because Truist Financial is winding down some consumer loan portfolios to improve returns and capital efficiency, the market may still be cautious. This helps explain why the price sits below this intrinsic value estimate.

On these Excess Returns assumptions, Truist Financial stock currently screens as undervalued relative to its estimated intrinsic value.

Our Excess Returns analysis suggests Truist Financial is undervalued by 28.9%. Track this in your watchlist or portfolio, or discover 49 more high quality undervalued stocks.

Is Truist Financial a Bargain on Earnings?

The P/E ratio fits Truist Financial well because earnings power is still a key yardstick for large banks. Truist Financial currently trades on a P/E of 11.7x, which sits below the wider Banks industry average of 12.1x and the broader peer group average of 14.1x. On simple comparisons, the stock is priced at a discount to many listed banking peers.

Simply Wall St’s fair P/E for Truist Financial is 13.8x, based on factors such as the company’s size, risk profile and sector characteristics. That is higher than the current 11.7x level, which suggests investors are not paying the multiple that this framework indicates could be justified. The gap between the current and fair multiples is what leads to the view that Truist Financial screens as undervalued on earnings.

On the P/E multiple, Truist Financial stock looks undervalued relative to both its tailored fair ratio and typical banking peers.

The Truist Financial Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the Truist Financial valuation puzzle leaves off by spelling out what would need to happen to growth, margins and earnings for the stock to be worth materially more or less than today's price. Rather than relying on a single multiple or model, each narrative sets out the assumptions that sit behind its fair value view, so you can compare those expectations with Truist Financial's actual results over time on the Community page.

Share a narrative on Truist Financial to present your own numbers-based view on the stock, including whether moves such as winding down some consumer loans and the leadership change at Truist Wealth support today's price. Add your voice to the Simply Wall St community and track how your thesis holds up as future results and news arrive.

Do you think there's more to the story for Truist Financial? Head over to our Community to see what others are saying!

The Bottom Line

Truist Financial screens as undervalued on both the intrinsic value estimate from the Excess Returns model and on its earnings multiple, which point in the same direction even though they rely on different inputs. That alignment, together with the broader valuation checks, suggests the current share price still bakes in a discount rather than optimism. The key question from here is whether Truist Financial can execute on its shift in lending mix and wealth leadership without eroding returns, which will decide if that discount closes or proves to be justified.

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.