Credicorp (NYSE:BAP) Stock Looks Strong On Earnings But Fair Value Still Leads
Credicorp has posted an extremely strong multi year share price gain, yet at around US$386 the stock still screens as undervalued on both its intrinsic value estimate and traditional earnings based multiples. That combination of a big historical return and ongoing valuation upside is what investors now need to weigh.
- Credicorp has delivered a very large 5 year return of 434.1%, which puts recent short term moves in a much longer context of strong compounding.
- The valuation story may be supported if Credicorp can keep converting earnings into cash and maintaining asset quality, while any hit to profitability or balance sheet strength would quickly test how much value is really priced in.
- The company passes 4 of 6 valuation checks, so the broader picture is a mixed one rather than a clear bargain or clear premium, with the scorecard at 4 out of 6.
The issue now is whether Credicorp's strong share price run still leaves enough upside relative to its intrinsic value estimate to justify taking valuation risk from here.
Does Credicorp Look Undervalued on Excess Returns?
The Excess Returns model looks at how much value Credicorp creates above its estimated cost of equity. On this view, the stock’s intrinsic value is estimated at about $492 per share, compared with the current price near $386, which indicates a discount of roughly 21.6%.
Credicorp is modeled with an average return on equity of 20.95% and a stable EPS of $122.55 per share on a stable book value base of $584.94 per share. With the cost of equity at $56.98 per share and an excess return of $65.57 per share, the model assumes the company can keep generating returns above what shareholders require. That supports an intrinsic value that sits meaningfully above the current market price.
On the Excess Returns view, Credicorp stock currently screens as undervalued relative to its implied intrinsic value.
Our Excess Returns analysis suggests Credicorp is undervalued by 21.6%. Track this in your watchlist or portfolio, or discover 52 more high quality undervalued stocks.
Does Credicorp Look Undervalued on Earnings?
P/E is often one of the clearest ways to compare banks, and Credicorp is no exception since earnings are a central driver for this type of business. Credicorp trades on a P/E of 14.1x, which sits above the broader Banks industry average of about 12.1x. It is, however, below the peer group average of 17.2x, so the stock changes hands at a mid-range multiple within its sector.
The Fair Ratio for Credicorp is estimated at 16.0x based on its profile and risk characteristics. That is higher than the current 14.1x, which suggests the stock trades at a discount of a little over one turn of earnings to where the model would place it. For investors who prefer to cross-check the Excess Returns valuation with simpler earnings-based measures, the P/E still indicates some potential upside if Credicorp can sustain its earnings power.
On P/E, Credicorp stock currently appears undervalued relative to the multiple implied by its Fair Ratio.
See what the numbers say about this price — find out in our valuation breakdown.
The Credicorp Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Credicorp build on the valuation work above and outline which potential paths for growth, margins and earnings could make the stock worth materially more or less than today’s price. Each narrative links its figures to a clear view on how Credicorp's growth, profitability and risk profile might evolve, so you can return to the same framework as new results and data appear on the Community page.
The community is split on Credicorp, with one camp seeing digital growth as a support for today’s price and another focused on higher risk lending and cost pressure.
Bull case: roughly fairly valued
"The group's strategic shift toward a more diversified, fee-generating, and digitally enabled business model is reducing earnings volatility and increasing cross-sell opportunities in insurance, pensions, and wealth management."
Read the full Bull Case to see why Credicorp could be undervalued
Bear case: 29% overvalued
"The push to grow retail, microfinance and Yape lending faster than the rest of the book concentrates exposure in higher yield segments that also carry structurally higher default risk."
Read the full Bear Case to see why Credicorp could be overvalued
Do you think there's more to the story for Credicorp? Head over to our Community to see what others are saying!
The Bottom Line
For Credicorp, both the Excess Returns intrinsic value estimate and the P/E based Fair Ratio point to an undervalued stock, even after a very large 5 year gain. The models broadly agree that the current price embeds a discount rather than stretch pricing, although the mixed outcome on wider valuation checks suggests the margin of safety is not clear cut. The real hinge from here is whether Credicorp can keep turning its reported returns and earnings profile into sustained cash generation without a material rise in credit risk. That is what will decide if the current discount is an opportunity or a warning.
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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