Deciding whether to hold, buy, or sell a stock like Resona Holdings can feel like a high-stakes game. If you have been watching, you have already seen a journey worth talking about. Over the past five years, Resona Holdings has delivered a jaw-dropping 356.1% return, and in just the last year, shares are up 47.5%. Even though there has been a slight pullback of -1.0% in the last week and -1.4% over the past month, it is clear the long-term trajectory has been overwhelmingly positive. Year to date, the stock has surged another 28.7%, firmly planting it in the spotlight for investors trying to gauge both growth potential and changes in how the market perceives risks related to Japan’s banking sector or broader financial reforms.

But that is only part of the story. The real question is what you should do with the stock now, with current prices sitting at 1472.5. Is Resona Holdings still attractively valued? To cut to the chase, the company scores a 4 out of 6 on our value score system, meaning it is undervalued on most but not all of the valuation checks we use. If you are looking for a smart way to approach your next move, it is time to break down the numbers, compare competing valuation methods, and get a feel for what those signals are really telling us. And if you stick around to the end, I will show you an even sharper lens for understanding what the typical valuation approaches might be missing.

Why Resona Holdings is lagging behind its peers

The Excess Returns valuation model is designed to assess how effectively a company earns returns above its cost of equity. Rather than focusing purely on cash flows or dividends, this approach emphasizes return on invested capital, specifically how much more Resona Holdings earns for shareholders compared to the company's inherent risks and cost of capital.

Resona Holdings currently has a Book Value of ¥1,223.55 per share and a Stable EPS of ¥133.03 per share. These projections are weighted by future Return on Equity estimates from eight analysts. The calculated Cost of Equity is ¥89.87 per share, meaning the company generates an Excess Return of ¥43.17 per share above what investors typically require for this risk level. On average, Resona achieves a 9.49% Return on Equity. Moreover, estimates point to a Stable Book Value of ¥1,401.55 per share.

Using all of this information, the Excess Returns model concludes that Resona Holdings’ intrinsic value is significantly higher than its current market price, implying the stock is trading at a 31.0% discount. This suggests that shares appear undervalued based on the company’s strong ability to generate returns above its cost of capital.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Resona Holdings.

Our Excess Returns analysis suggests Resona Holdings is undervalued by 31.0%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

The Price-to-Earnings (PE) ratio is a widely recognized way to value profitable companies because it connects the market’s expectations for a stock with the company’s actual earnings power. Investors often rely on this metric as a first check for fair value, since it quickly shows how much shareholders are willing to pay for one yen of profit.

It is important to remember that a company’s PE ratio should not be judged in isolation. Growth expectations and risk play a major role in shaping what is considered a “normal” or “fair” PE. Companies with strong growth outlooks or lower risk profiles typically deserve higher PEs than slower-growing or riskier peers, so context really matters.

For Resona Holdings, the current PE is 14.65x. That is higher than the industry average of 10.99x for banks but lower than the average of its closest peers at 17.35x. To sharpen this perspective, Simply Wall St uses a proprietary “Fair Ratio” metric, calculated for Resona at 15.08x. The Fair Ratio stands out because it weighs not just peer or sector multiples, but also combines critical data like earnings growth potential, profitability, industry trends, company-specific risks, and market capitalization.

Comparing Resona’s actual PE (14.65x) with its Fair Ratio (15.08x), the gap is small and well within the margin for error. This suggests that the market price is close to fair value for this stock using the PE lens.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 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. A Narrative is simply your story about a company, a perspective that connects what you know about Resona Holdings to your expectations for its future financial performance, and ultimately, to what you believe is a fair price for its shares.

Rather than relying solely on standard metrics, Narratives allow you to tie together your view of the company's business drivers, risks, and opportunities with forecasts for revenue, earnings, and margins. This approach makes it much easier to see how changes in the company's story, such as a new buyback program or rising operating expenses, impact what you think the stock is worth.

Best of all, Narratives are easily created and tracked through the Simply Wall St Community page, where millions of investors share their perspectives and adjust their fair value estimates as new news or results unfold. Narratives update dynamically when new facts emerge, keeping your outlook relevant and timely.

For example, some investors may see strong capital management and fee income growth leading to a bullish price target of ¥1,790. Others, more cautious about rising costs or integration risks, set a target as low as ¥1,080. Narratives help you compare those different opinions, see how they link to financial forecasts, and weigh them against the current market price.

Do you think there's more to the story for Resona Holdings? Create your own Narrative to let the Community know!

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 8308.

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