- If you are wondering whether Bank of Montreal at around $184.56 is offering fair value or a potential bargain, this article will help you frame that question using several valuation angles.
- The stock has returned 1.6% over the last week, 3.2% over the last month, 1.6% year to date, 37.0% over the last year, 61.8% over three years and 127.8% over five years, which may influence how you think about both opportunity and risk today.
- Recent coverage has focused on Bank of Montreal as one of Canada’s major banks, with investors watching how larger financial institutions position themselves and manage their capital in a changing rate backdrop. This context helps frame why the share price moves over different time frames can matter when you start comparing the current price to various measures of value.
- On Simply Wall St’s 6 point valuation checklist, Bank of Montreal scores a 2 out of 6. This suggests some measures signal potential undervaluation while others do not. Next, we will look at what that means across different valuation methods before circling back to an even richer way of thinking about value at the end of the article.
Bank of Montreal scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.
Approach 1: Bank of Montreal Excess Returns Analysis
The Excess Returns model looks at how much profit a bank can generate on its equity above the return that shareholders require, then capitalises that stream of “excess” profit into an intrinsic value per share.
For Bank of Montreal, the model uses a Book Value of CA$122.02 per share and a Stable EPS of CA$15.04 per share, based on weighted future Return on Equity estimates from 13 analysts. The Average Return on Equity sits at 12.29%, while the Cost of Equity is CA$8.83 per share. That gap translates into an Excess Return of CA$6.22 per share, indicating the bank is expected to earn more on its equity than investors are assumed to require.
The Stable Book Value input of CA$122.42 per share, sourced from 10 analysts, helps anchor the long term value of the equity the bank is working with. Combining these assumptions, the Excess Returns model arrives at an intrinsic value estimate of CA$261.85 per share, compared with the current share price of around CA$184.56. On this basis, the stock screens as about 29.5% undervalued.
Result: UNDERVALUED
Our Excess Returns analysis suggests Bank of Montreal is undervalued by 29.5%. Track this in your watchlist or portfolio, or discover 879 more undervalued stocks based on cash flows.
BMO Discounted Cash Flow as at Jan 2026
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Bank of Montreal.
Approach 2: Bank of Montreal Price vs Earnings
For a profitable bank like Bank of Montreal, the P/E ratio is a useful shorthand because it links what you pay per share to the earnings the business is already generating. It gives you a quick way to see how much of those earnings the market is currently willing to pay for.
What counts as a “normal” or “fair” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can justify a higher P/E, while slower expected growth or higher perceived risk usually points to a lower P/E.
Bank of Montreal trades on a P/E of 15.89x, compared with the broader Banks industry average of 11.05x. It also sits close to the peer average of 15.06x. Simply Wall St’s Fair Ratio for Bank of Montreal is 15.61x, which is a proprietary estimate of what the P/E could be given factors such as earnings characteristics, industry, profit margin, market cap and risk profile. Because it blends these company specific inputs, the Fair Ratio can be more tailored than a simple comparison with peers or the overall industry.
The current P/E of 15.89x is very close to the Fair Ratio of 15.61x, so on this metric the stock looks about in line with what the model suggests.
Result: ABOUT RIGHT
TSX:BMO P/E Ratio as at Jan 2026
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1444 companies where insiders are betting big on explosive growth.
Upgrade Your Decision Making: Choose your Bank of Montreal Narrative
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which on Simply Wall St’s Community page let you set out your own story for Bank of Montreal, connect that story to explicit forecasts for revenue, earnings and margins, and translate it into a fair value that is continuously updated as news or earnings arrive. This allows you to compare that fair value with the current share price and decide how you want to act, whether you see a cautious CA$151.00 outlook that stresses risks around credit quality and expenses, or a more optimistic CA$180.00 view that focuses on digital banking, acquisitions and fee income growth, all within a simple tool used by millions of investors.
Do you think there’s more to the story for Bank of Montreal? Head over to our Community to see what others are saying!
TSX:BMO 1-Year Stock Price Chart
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.
Valuation is complex, but we’re here to simplify it.
Discover if Bank of Montreal might be undervalued or overvalued with our detailed analysis, featuring fair value estimates, potential risks, dividends, insider trades, and its financial condition.
Access Free Analysis
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]
