Compare Bank of Montreal (BMO) vs Royal Bank of Canada (RY) Stock

Royal Bank of Canada (RY) offers the better valuation at 16.2x trailing P/E (10.6x forward), making it the more compelling value choice. Analysts rate Bank of Montreal (BMO) a "Buy" — based on 18 analyst ratings — the highest consensus in this comparison. The "better buy" depends entirely on your goals: growth investors should weight revenue trajectory, value investors should weight P/E and PEG, and income investors should weight dividend yield and streak.

On trailing P/E, Royal Bank of Canada (RY) is the cheapest at 16.2x versus Bank of Montreal at 17.2x. On forward P/E, Bank of Montreal is actually cheaper at 10.2x — notably different from the trailing picture, reflecting expected earnings growth. The PEG ratio (P/E divided by earnings growth rate) is the most growth-adjusted single valuation metric: Royal Bank of Canada wins at 0.85x versus Bank of Montreal's 1.17x — a PEG below 1.0 traditionally signals the market is underpricing earnings growth.

Over the past 5 years, Royal Bank of Canada (RY) delivered a total return of +115.7%, compared to +97.1% for Bank of Montreal (BMO). A $10,000 investment in RY five years ago would be worth approximately $22K today (assuming dividends reinvested). Over 10 years, the gap is even starker: RY returned +295.9% versus BMO's +227.9%. Past returns do not guarantee future results, and the stock with the higher historical return may already have its best growth priced in.

By beta (market sensitivity over 5 years), Royal Bank of Canada (RY) is the lower-risk stock at 0.56β versus Bank of Montreal's 0.66β — meaning BMO is approximately 19% more volatile than RY relative to the S&P 500. On balance sheet safety, Bank of Montreal (BMO) carries a lower debt/equity ratio of 5% versus 6% for Royal Bank of Canada — giving it more financial flexibility in a downturn.

Royal Bank of Canada (RY) is the more profitable company, earning 14.8% net margin versus 11.1% for Bank of Montreal — meaning it keeps 14.8% of every revenue dollar as bottom-line profit. Operating margin tells a similar story: RY leads at 18.7% versus 14.8% for BMO. At the gross margin level — before operating expenses — RY leads at 45.3%, reflecting greater pricing power or product mix advantage. Stronger margins indicate durable pricing power, lower cost of revenue, or higher mix of software/services. They are one of the clearest signs of business quality.

The PEG ratio (forward P/E divided by expected earnings growth rate) is the most precise measure of undervaluation relative to growth potential. By this metric, Royal Bank of Canada (RY) is the more undervalued stock at a PEG of 0.85x versus Bank of Montreal's 1.17x. A PEG below 1.0 is traditionally considered the threshold for growth-adjusted undervaluation. On forward earnings alone, Bank of Montreal (BMO) trades at 10.2x forward P/E versus 10.6x for Royal Bank of Canada — 0.4x cheaper on a one-year earnings basis. Analyst consensus price targets imply the most upside for RY: -25.3% to $124.85.

All stocks in this comparison pay dividends. Bank of Montreal (BMO) offers the highest yield at 3.5%, versus 2.7% for Royal Bank of Canada (RY).

For long-horizon retirement investors, Royal Bank of Canada (RY) is the stronger choice — it scores higher on the combination of lower volatility, dividend reliability, and long-term compounding (low volatility (β 0.56), 2.7% yield, +295.9% 10Y return). Both have compounded well over 10 years (RY: +295.9%, BMO: +227.9%), confirming both are viable long-term holds — but the lower-volatility option typically results in less emotional selling during corrections. Retirement portfolios generally favour predictability over maximum returns. Consult a financial advisor before making allocation decisions.

Both stocks operate in the Financial Services sector, making this a peer-level intra-sector comparison — the same macro tailwinds and headwinds will affect both. These fundamental differences mean investors should not choose between them on a single metric — the "better stock" depends entirely on which of these characteristics aligns with your investment strategy.