• Investors may be wondering if First Horizon at US$24.71 is offering value right now, or if most of the easy gains are already behind it.
• The stock has returned 3.0% over the last 7 days, 8.9% over 30 days, 2.4% year to date, 43.0% over 1 year, 57.0% over 3 years and 58.4% over 5 years, which naturally raises questions about what is already reflected in the price.
• Recent coverage of First Horizon has focused on its share price performance and how investors are reassessing regional banks, with attention on how each name is positioned on capital strength and growth plans. This context has kept valuation and risk perceptions firmly in the spotlight for the stock.
• Simply Wall St currently gives First Horizon a 3/6 valuation score. The rest of this article explains what that means using different valuation approaches and then introduces a more complete way to think about valuation at the end.

First Horizon delivered 43.0% returns over the last year. See how this stacks up to the rest of the Banks industry.

Approach 1: First Horizon Excess Returns Analysis

The Excess Returns model looks at how efficiently First Horizon uses shareholders’ equity. It compares the return generated on that equity with the cost of that equity, and then converts the surplus into an estimated per share value.

For First Horizon, book value is $17.71 per share and the stable earnings estimate is $2.39 per share, based on weighted future Return on Equity estimates from 10 analysts. The average Return on Equity is 12.18%, while the cost of equity is $1.37 per share. That leaves an excess return of $1.02 per share, which is what this model treats as value created above the required return.

The stable book value is $19.63 per share, based on weighted future Book Value estimates from 12 analysts. Combining this with the excess return stream gives an intrinsic value estimate of $48.27 per share. Against the current price of US$24.71, this suggests the stock is 48.8% undervalued on this approach.

Result: UNDERVALUED

Our Excess Returns analysis suggests First Horizon is undervalued by 48.8%. Track this in your watchlist or portfolio, or discover 55 more high quality undervalued stocks.

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

Approach 2: First Horizon Price vs Earnings

For a profitable company, the P/E ratio is a straightforward way to link what you pay per share to the earnings the business is currently generating. It helps you see how many dollars investors are willing to pay today for each dollar of earnings.

What counts as a “normal” P/E depends on how the market views a company’s growth potential and risk. Higher growth and lower perceived risk typically support a higher P/E, while slower growth or higher risk usually point to a lower multiple.

First Horizon currently trades on a P/E of 11.76x. That is close to the Banks industry average of 11.70x and also near the peer average of 11.44x, so the stock is broadly in line with sector and peer pricing on this measure.

Simply Wall St’s “Fair Ratio” for First Horizon is 13.16x. This is a proprietary estimate of the P/E the company might reasonably trade on, based on factors such as earnings growth, profit margins, industry, market cap and risk profile. Because it is tailored to the company, it can be more informative than simply comparing with peer or industry averages.

Comparing the Fair Ratio of 13.16x with the current P/E of 11.76x suggests the shares are trading below this fair multiple.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 18 top founder-led companies.

Upgrade Your Decision Making: Choose your First Horizon Narrative

Earlier it was mentioned that there is an even better way to understand valuation. Narratives on Simply Wall St take your view of First Horizon’s story, link it to a revenue, earnings and margin forecast, turn that into a fair value, then let you compare that fair value with the current share price on the Community page. There, different investors might, for example, build a more upbeat Narrative that lines up with analysts expecting First Horizon’s earnings to reach US$1.1b and a P/E of 12.4x by 2029. More cautious Narratives might lean on the same published risks around credit costs and margins. All of these are updated automatically as fresh news or earnings are added, so you can see in one place how a chosen story, the numbers behind it, and the gap between fair value and price evolve over time.

Do you think there's more to the story for First Horizon? 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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

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.