Asset Management company The Bank of New York Mellon is taking Wall Street by surprise today, falling to $43.42 and marking a -6.3% change.
BK is -18.38% below its average analyst target price of $53.2, which implies there is more upside for the stock.
As such, the average analyst rates it at buy. Over the last year, The Bank of New York Mellon shares have outstripped the S&P 500 by 6.0%, with a price change of 0.3%.
The Bank of New York Mellon Corporation provides a range of financial products and services in the United States and internationally. The company is part of the financial services sector, alongside a staggering variety of banking, mortgage, insurance,and credit service companies. If there is one common denominator among all companies in the sector, it’s that they are all dedicated to maintaining and developing new systems for the storage and transfer of value and risk.
The Bank of New York Mellon's trailing 12 month P/E ratio is 15.0, based on its trailing EPS of $2.9. The company has a forward P/E ratio of 8.3 according to its forward EPS of $5.25 -- which is an estimate of what its earnings will look like in the next quarter. The P/E ratio is the company's share price divided by its earnings per share. In other words, it represents how much investors are willing to spend for each dollar of the company's earnings (revenues minus the cost of goods sold, taxes, and overhead). As of the first quarter of 2023, the finance sector has an average P/E ratio of 14.34, and the average for the S&P 500 is 15.97.
It’s important to put the P/E ratio into context by dividing it by the company’s projected five-year growth rate. This results in the Price to Earnings Growth, or PEG ratio. Companies with comparatively high P/E ratios may still have a reasonable PEG ratio if their expected growth is strong. On the other hand, a company with low P/E ratios may not be of value to investors if it has low projected growth.
The Bank of New York Mellon's PEG ratio of 1.2 indicates that its P/E ratio is fair compared to its projected earnings growth. Insofar as its projected earnings growth rate turns out to be true, the company is probably fairly valued by this metric.
When we subtract capital expenditures from operating cash flows, we are left with the company's free cash flow, which for The Bank of New York Mellon was $13,722,000,000.00 as of its last annual report. This represents the amount of money that is available for reinvesting in the business, or for paying out to investors in the form of a dividend. With its strong cash flows, BK is in a position to do either -- which can encourage more investors to place their capital in the company. Over the last four years, the company's free cash flow has been growing at a rate of 91.0% and has on average been $4,511,750,000.00.
Another valuation metric for analyzing a stock is its Price to Book (P/B) Ratio, which consists in its share price divided by its book value per share. The book value refers to the present liquidation value of the company, as if it sold all of its assets and paid off all debts). The bank of new york mellon's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 1.0, but is still below the average P/B ratio of the Finance sector, which stood at 1.57 as of the first quarter of 2023.
The Bank of New York Mellon is likely undervalued at today's prices because it has an average P/E ratio, an exceptionally low P/B ratio, and an irregular stream of positive cash flows with an upwards trend. The stock has poor growth indicators because of its average net margins with a negative growth trend, and an inflated PEG ratio. We hope this preliminary analysis will encourage you to do your own research into BK's fundamental values -- especially their trends over the last few years, which provide the clearest picture of the company's valuation.
