Bank of New York Mellon Corp (BNY)

FairStock Score: 59/100 — STEADY

Key Financials

Strengths

• Global custody and asset-servicing moat with high switching costs
• Strong reported growth: revenue +13.85%, profit +33.77%, and latest quarter net income of $1.6B on $5.3B revenue (30.58% margin)
• ROE of 14.12% and earnings yield of roughly 6.2% at a 16.24 P/E
• Diversified fee-based revenue from custody, ETF services, FX, securities lending, and wealth management
• PEG of 0.56 suggests the market may be underpricing near-term growth

Concerns

• No margin of safety: price trades about 24% above Graham Number of $112.17
• Piotroski F-Score of 3/9 and negative FCF yield of -3.8% signal weak cash conversion and operating health
• Altman Z-Score of 0.24 is low, though less meaningful for financial institutions
• Exposed to market cycles, interest-rate compression, and persistent fee pressure in custody and asset management

AI Analysis

At first glance, BNY Mellon looks like the kind of franchise I admire: a dominant custodian and asset servicer. The world's funds, ETFs, and institutional money need a utility-like trust infrastructure, and BNY is one of its key toll booths. Switching costs are enormous. That creates a moat that can endure for decades. But the numbers tell me this is not a Graham buy today. Earnings per share are $8.57, so at $139.15 I'm paying 16.24 times earnings. The Graham Number is $112.17, which implies my margin of safety is negative 24%. That would have made Ben Graham uncomfortable. ROE is a solid 14.12%, and the reported growth is good: revenue up 13.85%, profit up 33.77%, and the latest quarter produced $1.6 billion of net income on $5.3 billion of revenue, a 30.6% margin. Still, I have to respect the warnings. The Piotroski F-Score is only 3 out of 9, and free cash flow yield is negative at -3.8%. Banks and custodians have odd cash-flow mechanics, but that is still a yellow flag. The Altman Z-Score of 0.24 is low, though I give banks less weight there because their balance-sheet structure is different. This is a quality financial stalwart with a durable franchise. My discipline demands a margin of safety. I'd wait for a lower price closer to the Graham Number, or for evidence that the F-Score and cash flows improve, before treating it as a serious value opportunity.

Bull Case

Rising asset markets and higher interest rates lift custody fees, FX revenue, and net interest income, allowing BNY to deliver continued double-digit earnings growth. At 16.2x earnings with a PEG of 0.56, the market could re-rate the stock upward as the franchise continues to compound.

Bear Case

A market downturn or falling rates would compress fee and net interest revenue, exposing the weak F-Score and negative free cash flow. The stock could de-rate to 12-14x earnings, pulling the price toward or below the Graham Number.

Data from SEC filings. AI analysis is for educational purposes only — not investment advice. Scoring methodology · Disclaimer