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For a profitable bank like Banco Bilbao Vizcaya Argentaria, the P/E ratio is a useful way to relate what you are paying for each share to the earnings that the business is currently generating. It gives you a quick sense of how the market is pricing those earnings today.

What counts as a “normal” P/E will usually reflect how the market views a company’s growth prospects and risk profile. Higher expected growth or lower perceived risk can justify a higher multiple, while lower growth or higher risk can point to a lower one.

Banco Bilbao Vizcaya Argentaria trades on a P/E of 12.14x, compared with the Banks industry average of 11.13x and a peer group average of 11.64x. Simply Wall St’s Fair Ratio for the company is 13.08x, which is a proprietary estimate of what the P/E could be based on factors such as earnings growth, profit margins, industry, market cap and risk. This Fair Ratio goes beyond simple peer or industry comparisons because it adjusts for those company specific characteristics rather than assuming all banks deserve the same multiple. On this basis, the current 12.14x P/E sits below the 13.08x Fair Ratio, which indicates that the shares appear undervalued on this measure.

Result: UNDERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1426 companies where insiders are betting big on explosive growth.

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about a company linked directly to your own forecasts and fair value estimate. On Simply Wall St, a Narrative lets you set assumptions for future revenue, earnings and margins, then connects that story to a financial model that produces a fair value that you can compare with the current share price to help you decide whether a stock looks appealing or not. Narratives live in the Community section on the platform, where millions of investors share and refine their views, and they update automatically when fresh information such as earnings or news is added, so your story never sits still. For example, one Banco Bilbao Vizcaya Argentaria Narrative might argue for a relatively high fair value based on stronger profitability assumptions while another might suggest a lower fair value based on more cautious earnings expectations.

Do you think there’s more to the story for Banco Bilbao Vizcaya Argentaria? Head over to our Community to see what others are saying!

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.

Companies discussed in this article include BBVA.MC.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com

Make better investment decisions with Simply Wall St’s easy, visual tools that give you a competitive edge.

Without a specific headline event driving attention today, ARMOUR Residential REIT (ARR) is on investors’ radar because of its recent price moves and its role as a mortgage focused real estate investment trust.

The stock’s recent returns include a 5.3% decline over the past week, a 3.8% decline over the past month, and a 6.5% gain over the past 3 months, with shares last closing at US$17.40. Over the past year, the total return stands at 10.0%. The past 3 years show total returns of 8.1%, and the past 5 years show a 33.8% decline.

ARMOUR Residential REIT invests primarily in US agency residential mortgage backed securities, including fixed rate, hybrid adjustable rate, and adjustable rate home loans, along with unsecured notes and bonds from government sponsored entities and US Treasuries. It has elected REIT tax status, which means it is not subject to corporate income tax on qualifying income that is distributed to shareholders.

See our latest analysis for ARMOUR Residential REIT.

Putting it all together, ARMOUR Residential REIT’s recent 1 month share price return of 3.8% decline and 3 month gain of 6.5% contrast with a 5 year total shareholder return of 33.8% decline. This points to short term momentum improving off a weak longer term base.

If moves in mortgage focused REITs have your attention, this can be a good moment to broaden your search and check out fast growing stocks with high insider ownership for other ideas on Simply Wall St.

With ARMOUR Residential REIT’s mixed recent returns, rapid revenue and net income growth, and a share price close to the US$18.63 analyst target, you have to ask: is there hidden value here, or is the market already pricing in future growth?

ARMOUR Residential REIT’s most followed narrative suggests a fair value of $17.00, slightly below the last close of $17.40, which implies only a small valuation gap.

Federal Reserve easing and a potential shift toward using SOFR or similar repo based measures as a policy benchmark are expected to lower funding costs and reduce rate volatility, supporting wider economic net interest margins and more stable distributable earnings.

Read the complete narrative.

Analysts are not just talking about interest rates. They are incorporating powerful revenue growth, expanding margins and a very low future earnings multiple. Curious what that combination implies for 2028?

Result: Fair Value of $17.00 (OVERVALUED)

Have a read of the narrative in full and understand what’s behind the forecasts.

However, this story could change if interest rates move higher again or if funding markets and repo liquidity come under stress, which would pressure margins and book value.

Find out about the key risks to this ARMOUR Residential REIT narrative.

If you look at the data and reach a different conclusion, or prefer to run the numbers yourself instead, you can build a custom view in under 3 minutes with Do it your way.

A great starting point for your ARMOUR Residential REIT research is our analysis highlighting 1 key reward and 4 important warning signs that could impact your investment decision.

If ARMOUR Residential REIT has sharpened your interest, do not stop here. Use the Simply Wall St Screener to quickly surface other focused opportunities across the market.

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.

Companies discussed in this article include ARR.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com