Is Bank of Montreal (TSX:BMO) Pricing Reflecting Its Strong Multi Year Share Performance

Simply Wall St

Fri, February 13, 2026 at 10:11 AM GMT+9 5 min read

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BMO

-2.46%

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If you are asking yourself whether Bank of Montreal is fairly priced at around C$190.78, you are not alone, many investors are trying to work out what a reasonable value looks like for this bank stock.

The share price has been relatively steady over the past week with a 0.4% decline, while returns of 3.9% over 30 days, 5.0% year to date and 39.4% over 1 year give useful context for anyone assessing how the market is currently treating the stock.

Recent coverage of Bank of Montreal has focused on its position within the Canadian banking sector and how investors view its long term prospects in that context. This backdrop helps explain why the shares have seen both shorter term moves and strong multi year returns of 62.1% over 3 years and 137.2% over 5 years.

Our valuation checks currently give Bank of Montreal a 2 out of 6 score for undervaluation. This suggests parts of the market view the stock as reasonably valued, while some measures point to potential upside. Next we will look at the usual valuation tools like P/E, dividend yield and intrinsic value estimates. We will then finish with a more complete way to think about value that ties all of these together.

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 effectively Bank of Montreal turns its equity base into earnings after accounting for the required return that shareholders expect. Instead of focusing on cash flows, it compares the bank’s return on equity with its cost of equity to estimate what each share could be worth today.

Bank of Montreal has a Book Value of CA$122.02 per share and a Stable EPS estimate of CA$15.25 per share, based on weighted future Return on Equity estimates from 13 analysts. The Average Return on Equity used in the model is 12.42%, while the Cost of Equity is CA$8.92 per share. That leads to an Excess Return of CA$6.33 per share, with a Stable Book Value of CA$122.80 per share, based on weighted future Book Value estimates from 9 analysts.

Putting these together, the Excess Returns model produces an intrinsic value of about CA$266.77 per share. Compared with the recent share price of around CA$190.78, this suggests the stock is about 28.5% undervalued according to this framework.

Result: UNDERVALUED

Our Excess Returns analysis suggests Bank of Montreal is undervalued by 28.5%. Track this in your watchlist or portfolio, or discover 5 more high quality undervalued stocks.

Story Continues  

BMO Discounted Cash Flow as at Feb 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 for how much investors are currently paying for each dollar of earnings. It links directly to the bottom line, which is what ultimately supports dividends and reinvestment.

What counts as a “normal” P/E depends on what the market expects for growth and how risky those earnings are. Higher growth or lower perceived risk can justify a higher P/E, while slower growth or higher risk usually lines up with a lower multiple.

Bank of Montreal currently trades on a P/E of 16.43x. That sits above the Banks industry average of 11.29x and slightly above the peer group average of 15.19x. Simply Wall St’s Fair Ratio for Bank of Montreal is 15.76x, which is its estimate of an appropriate P/E given factors such as earnings profile, industry, margins, size and key risks.

Compared with simple industry or peer comparisons, the Fair Ratio is more tailored because it adjusts for the company’s specific characteristics rather than assuming all banks deserve the same multiple. With the actual P/E of 16.43x only modestly above the Fair Ratio of 15.76x, the stock appears slightly expensive on this metric.

Result: OVERVALUED

TSX:BMO P/E Ratio as at Feb 2026

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Upgrade Your Decision Making: Choose your Bank of Montreal Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives. These are simple stories you build around Bank of Montreal that connect your assumptions about future revenue, earnings and margins to a fair value estimate, then compare that fair value with today’s share price to help you decide whether the stock looks attractive or not. All of this happens within the Simply Wall St Community page where millions of investors share views, update Narratives automatically when new news or earnings arrive, and can even hold very different opinions. For example, one investor might see fair value closer to the higher analyst price target of CA$180.00, while another might anchor on the lower CA$151.00 target, yet both are using the same structure of linking their view of the company’s story to a forward forecast and a price that makes sense to them.

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._

Companies discussed in this article include BMO.TO.

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

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