• If you have been wondering whether Northern Trust's recent share price reflects its underlying worth, this breakdown will help you separate price from value.
• Northern Trust's last close was US$156.77, with returns of 2.7% over 7 days, 14.6% over 30 days, 12.6% year to date, 82.0% over 1 year, 100.9% over 3 years, and 70.8% over 5 years.
• Recent coverage has focused on Northern Trust as a long established financial institution and how investor sentiment around financial services has been shifting. This context helps explain why the share price performance has drawn attention and why valuation has become a key question for many holders.
• Northern Trust currently has a value score of 3/6, and the next sections will walk through how different valuation approaches arrive at that score while saving a more complete way to think about value for the end of the article.

Northern Trust delivered 82.0% returns over the last year. See how this stacks up to the rest of the Capital Markets industry.

Approach 1: Northern Trust Excess Returns Analysis

The Excess Returns model looks at how much profit a company is expected to generate above the return that equity investors require, then ties that back to what the business could be worth per share today.

For Northern Trust, the starting point is its book value of $64.79 per share, which represents the accounting value of shareholders’ equity. Analysts estimate a stable earnings figure of $12.02 per share, based on weighted future Return on Equity forecasts from 10 analysts. On the capital side, the cost of equity is estimated at $6.90 per share, implying excess return of $5.12 per share once that required return is covered.

An average Return on Equity of 16.18% and an expected stable book value of $74.29 per share, based on estimates from 7 analysts, feed into the model’s projection of ongoing excess returns. When these expected excess returns are capitalized, the model arrives at an intrinsic value of about $161.53 per share.

Compared with the recent share price of $156.77, this implies the stock is around 2.9% undervalued, which is a fairly small gap.

Result: ABOUT RIGHT

Northern Trust is fairly valued according to our Excess Returns, but this can change at a moment's notice. Track the value in your watchlist or portfolio and be alerted on when to act.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Northern Trust.

Approach 2: Northern Trust Price vs Earnings

P/E is a useful way to value a profitable company like Northern Trust because it ties what you pay directly to the earnings generated per share. It also reflects what the market is willing to pay today for each dollar of current earnings.

What counts as a "normal" or "fair" P/E depends on how investors view the company’s growth potential and risk. Higher expected earnings growth or perceived resilience can support a higher P/E, while higher risk or weaker growth expectations usually point to a lower multiple.

Northern Trust currently trades on a P/E of 17.30x. That is below the Capital Markets industry average P/E of 41.61x and also below the peer average of 23.01x. Simply Wall St’s Fair Ratio for Northern Trust is 14.22x. This represents the P/E that would typically be expected given factors such as its earnings profile, industry, profit margins, market cap and risk characteristics.

The Fair Ratio is more tailored than a straight comparison with peers or the broader industry because it adjusts for company specific factors rather than relying on broad group averages. Relative to this Fair Ratio, Northern Trust’s P/E of 17.30x screens as higher.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Northern Trust Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Meet Narratives, a simple tool on Simply Wall St’s Community page that lets you write the story you believe about Northern Trust, link that story to your own revenue, earnings and margin forecasts, translate those forecasts into a Fair Value, then constantly compare that Fair Value with the live share price as news and earnings arrive. One investor might see Northern Trust as a higher conviction story closer to the bullish US$168 target, while another is more cautious around the US$130 bear case, and both can see in real time how new information shifts their numbers and whether the current price still fits their thesis.

Do you think there's more to the story for Northern Trust? 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.

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Disclaimer:This article represents the opinion of the author only. It does not represent the opinion of Webull, nor should it be viewed as an indication that Webull either agrees with or confirms the truthfulness or accuracy of the information. It should not be considered as investment advice from Webull or anyone else, nor should it be used as the basis of any investment decision.