UBS Group stock has already delivered a 217.1% total return over the past 5 years, yet the current share price around US$42.72 still screens as undervalued when compared with an intrinsic value estimate based on the Excess Returns model and with standard market multiples.
- A 217.1% return over 5 years suggests UBS Group has already rewarded long term shareholders while raising the bar for what counts as further upside from here.
- Future profitability and capital returns can support the current valuation, while any setback to earnings quality or balance sheet strength may quickly change how the stock is priced.
- UBS Group scores 4 out of 6 on the valuation checks, which points to a mixed picture rather than a clear bargain or clear overvaluation.
The issue now is whether UBS Group’s current price leaves enough margin between the market valuation and the intrinsic value estimate to justify fresh capital going into the stock.
Is UBS Group a Bargain on Excess Returns?
The Excess Returns model looks at how much profit UBS Group can generate over the cost of its equity capital and then capitalises that surplus. For UBS Group, the inputs used in the model indicate a stable earnings base, with EPS of CHF4.57 per share on a book value of CHF33.28 per share and an average return on equity of 13.74%. With a cost of equity of CHF1.96 per share and an estimated excess return of CHF2.61 per share, the model assumes that returns remain above the hurdle rate rather than relying on aggressive growth.
On these assumptions, the Excess Returns model indicates an intrinsic value of about CHF65.87 per share. This compares with a current share price around CHF42.72, which suggests that the stock trades at a sizeable discount, even with UBS Group already on a P/E multiple broadly in line with peers and a P/B ratio above the Capital Markets industry average.
On this model, UBS Group stock appears undervalued relative to its estimated intrinsic value of around CHF65.87 per share.
Our Excess Returns analysis suggests UBS Group is undervalued by 35.1%. Track this in your watchlist or portfolio, or discover 277 more high quality undervalued stocks.
Is UBS Group Still Cheap on Earnings?
The P/E ratio is usually the cleanest way to see what you are paying for each unit of UBS Group earnings. On this measure, UBS Group trades on about 17.2x trailing earnings, which is slightly below the peer group average of 17.7x and a little above the wider Capital Markets industry average of 16.2x.
The more tailored fair P/E ratio for UBS Group, which adjusts for factors such as profitability, size and risk, is higher at about 23.6x. That leaves a sizeable gap between the current 17.2x and the modelled fair multiple. If earnings remain around current levels, this indicates that the market is assigning a lower earnings multiple than the framework suggests for UBS Group.
On the P/E multiple, UBS Group stock appears undervalued relative to the earnings rating implied by this fair value model.
See what the numbers say about this price — find out in our valuation breakdown.
The UBS Group Narrative: What Would Justify Today's Price?
Simply Wall St Narratives pick up where the UBS Group valuation puzzle leaves off and spell out what growth, margins and earnings path would need to hold for the stock to be worth materially more or less than today’s price on the Community page. Each UBS Group narrative sets out a fair value as a thesis about the business that you can track over time, rather than treating it as a one off snapshot.
The UBS Group community is split between a scenario that looks roughly fairly valued and one that argues the stock is 26% overvalued.
Bull case: roughly fairly valued
"Integration of Credit Suisse and investment in digital infrastructure are enhancing efficiency, scalability, and profitability, boosting margins and long-term earnings potential…"
Read the full Bull Case to see why UBS Group could be undervalued
Bear case: 26% overvalued
"The proposed overhaul of Swiss bank capital regulation would require UBS to hold at least $24 billion, and potentially up to $42 billion, in additional capital at the parent bank and group level, materially depressing returns on equity and limiting the company's ability to distribute capital to shareholders over the long term…"
Read the full Bear Case to see why UBS Group could be overvalued
Do you think there's more to the story for UBS Group? Head over to our Community to see what others are saying!
The Bottom Line
UBS Group screens as undervalued on both the Excess Returns intrinsic value estimate and on earnings multiples, even after a strong 5 year return profile. The key question is whether integration, regulatory and capital requirements allow UBS Group to sustain returns that justify those models. If returns on equity stay above the estimated hurdle and capital demands are manageable, the current discount could offer upside over time. If extra capital buffers drag on profitability or constrain payouts, the apparent value gap may prove to be a value trap rather than an opportunity.
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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