Royal Bank of Canada (RY)
Valuation Overview•Is Royal Bank of Canada Overvalued or Undervalued?
Trading at a discount across both intrinsic cash flow and relative peer multiples, indicating a strong margin of safety.
Moderate quality score of 50/100, reflecting stable operating margins and manageable leverage.
Analysts remain bullish, forecasting further upside expansion with consensus targets suggesting solid gains.
Verdict: Average quality business weighed down by significant solvency concerns.
Wall Street is broadly bullish, projecting solid upside. This outlook is strongly supported by highly attractive capital returns, driven by a balanced mix of reliable dividends and share buybacks.
RY demonstrates strong business quality with robust profitability and healthy margins. However, this is severely offset by a highly leveraged balance sheet (Debt/EBITDA > 4.0x) and elevated financial risk.
The company maintains stable top-line performance paired with robust earnings compounding (8.4% EPS 3Y CAGR). The company maintains healthy operational efficiency with a 20.3% operating margin.
| Financial Metric | Trend (12Q) | Latest Qtr | 1Y Growth | 3Y CAGR | 5Y CAGR | 10Y CAGR |
|---|---|---|---|---|---|---|
| Revenue | $33.9B | +2.1% | — | — | +12.3% | |
| EBITDA | $7.8B | — | +8.1% | — | — | |
| Net Income | $5.5B | +25.5% | +8.8% | — | +7.5% | |
| EPS (Diluted) | $3.85 | +25.5% | +8.4% | +12.5% | +7.7% | |
| Free Cash Flow | $23.1B | +154.0% | +39.7% | -17.2% | — |
| Metric | TTM | 3Y Avg | 5Y Avg | 10Y Avg |
|---|---|---|---|---|
| Gross Margin | 47.2% | 43.0% | 57.7% | 65.3% |
| Operating Margin | 20.3% | 16.5% | 23.1% | 24.8% |
| Net Margin | 15.9% | 13.3% | 18.2% | 19.6% |
| FCF Margin | 30.3% | 24.9% | 41.2% | 60.2% |
| Quarter | EPS Est. | EPS Act. | Surprise | EPS | Rev |
|---|---|---|---|---|---|
| Q2'26Latest | $2.81 | $2.84 | +1.1% | ||
| Q1'26 | $2.81 | $2.94 | +4.6% | ||
| Q4'25 | $2.51 | $2.76 | +10.0% | ||
| Q3'25 | $2.36 | $2.79 | +18.2% | ||
| Q2'25 | $2.25 | $2.20 | -2.2% | ||
| Q1'25 | $2.28 | $2.55 | +11.8% | ||
| Q4'24 | $2.15 | $2.25 | +4.7% | ||
| Q3'24 | $2.15 | $2.38 | +10.7% |
Total return is +61.0% (1Y), outperforming the benchmark by +36.0%
| Period | Total Return | vs S&P 500 (Alpha) | Dividend Contribution |
|---|---|---|---|
| YTD | +19.4% | +10.1% | — |
| 1Y | +61.0% | +36.0% | +3.6% |
| 3YCAGR | +31.5% | +11.7% | +13.6% |
| 5YCAGR | +17.0% | +4.0% | +20.1% |
| 10YCAGR | +14.5% | +1.0% | — |
The S&P 500 is at 31.3x trailing P/E — Expensive relative to historical averages.
Quick answers to common questions about Royal Bank of Canada (RY) valuation, health, and returns.
Royal Bank of Canada is estimated to be undervalued under our discounted cash flow framework. relative multiples indicate the stock is Cheap versus peers compared to industry peers. undervalued (implying +20.0% upside to DCF intrinsic value of $241.85)
Royal Bank of Canada has multiple valuation anchors: DCF Intrinsic Value: $241.85 | Peer Relative Fair Value: $250.45 | Wall Street Analyst Target: $225.00 (implying +11.6% upside). A convergence of these signals offers higher conviction.
Royal Bank of Canada displays fair financial health with a composite quality score of 50/100, supported by a Piotroski F-Score of 6/9, Return on Invested Capital (ROIC) of 2.0%.
Royal Bank of Canada pays a 2.2% dividend yield, covered by a 43% payout ratio with 10 years of growth, supplemented by a 3.4% buyback yield.
Royal Bank of Canada's current growth trajectory is Decelerating. The company achieved +2.1% 1Y revenue growth and +25.5% 1Y EPS growth, compared to its 3Y revenue CAGR of N/A.
Wall Street consensus is Hold based on 29 analysts, beating EPS expectations in 92% of recent quarters with a 4-quarter streak. The consensus price target represents a +11.6% change from current levels.
Investment risks for Royal Bank of Canada include: -10.0% 1-year max drawdown. Volatility risk is characterized by a beta of 0.66x.
No. These computations are purely quantitative model outputs for informational purposes. They do not account for qualitative management shifts or macro events. Always consult a licensed RIA before buying or selling shares.
Disclaimer: This page is for informational purposes only and does not constitute financial advice. All valuation models, scores, and target estimates are automated computations under stated assumptions and should not be relied upon as the sole basis for any investment decision.