HSBC

We rate HSBC HOLDINGS PLC (HSBC) as a Hold with a composite score of 59.5/100 at a current price of $87.91. The stock presents a mixed quantitative picture — neither compelling enough to warrant new accumulation nor weak enough to justify selling for existing holders. Our factors are split, and the overall profile suggests patience is warranted.

The rating is primarily driven by strength in momentum (88th percentile) and investment (70th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (31th percentile) and stability (61th percentile) tempers our overall conviction. We assign a No Moat rating (39/100), Medium uncertainty, and Exemplary capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends. Any material change in these dynamics could warrant a reassessment of our rating. The moat trend is stable, which suggests the competitive landscape is stable for now.

HSBC HOLDINGS PLC holds a lower-quartile position (#46 of 50) within the Finance, Insurance, And Real Estate sector, based on our composite quantitative scoring across quality, value, momentum, and stability factors. The composite score of 59.5/100 places it at rank #746 in our full 7,333-stock universe. With a $180.5B market capitalization, HSBC HOLDINGS PLC operates at meaningful scale within the Finance, Insurance, And Real Estate sector, providing competitive advantages in distribution, procurement, and customer reach.

Despite positive momentum (88th percentile), revenue contraction of -5% creates a divergence between price action and fundamental trajectory. This divergence suggests either that the market is looking through near-term weakness or that technical factors are temporarily inflating the stock. Investors should assess whether the revenue decline reflects cyclical weakness or structural challenges.

The margin cascade tells an important story: gross margins of 68% (-8.4pp vs sector) narrow to operating margins of 32% (+14.9pp vs sector) and net margins of 52.0%, yielding a gross-to-net conversion rate of 76%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $87.91, HSBC HOLDINGS PLC is trading near fair value based on current fundamentals. Our value factor score of 68/100 reflects a composite assessment across multiple valuation metrics including price-to-earnings, price-to-book, EV/EBITDA, and price-to-sales ratios relative to both sector peers and the broader market. Valuation metrics are mixed, with no strong signal of mispricing in either direction.

The stock currently trades at EV/EBITDA of 4.6x (discounted to peers), P/B of 1.6x, P/S of 1.6x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Medium uncertainty rating to HSBC HOLDINGS PLC. The stock presents a balanced risk profile: weak quality scores (31th percentile). While not risk-free, the core business fundamentals are adequate to withstand moderate economic stress, and the range of potential outcomes around our fair value estimate is manageable.

Specific risk factors that inform our assessment include: weak quality scores (31th percentile). Each of these factors independently widens the distribution of potential outcomes, and in combination they create a risk profile that demands careful position sizing. The stability factor at the 61th percentile and quality factor at the 31th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 68% provide a buffer against cost pressures; above-average stability (61th percentile) suggests predictable business dynamics; large-cap scale ($180.5B) provides resilience. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile is favorable for long-term investors.

We rate HSBC HOLDINGS PLC's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 54.1%, a 8.75% dividend yield, best-in-class net margins of 52.0%. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — HSBC HOLDINGS PLC meets this high bar.

The balance sheet remains conservatively managed, providing financial flexibility for opportunistic investments while maintaining a margin of safety for shareholders. The company returns capital via a 8.75% dividend yield, and the combination of 3.3% return on assets and controlled leverage suggests management is deploying capital at rates well above the cost of capital — the hallmark of exemplary stewardship.

In summary, HSBC HOLDINGS PLC receives a Hold rating with a composite score of 59.5/100 (rank #746 of 7,333). Our quantitative framework assigns a No Moat (39/100, trend: stable), Medium uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 63/100.

Our analysis supports a neutral stance on HSBC HOLDINGS PLC. While the quantitative profile is not weak enough to warrant selling, it lacks the multi-factor strength required for a buy recommendation. Existing holders should maintain positions and monitor for catalysts — either fundamental improvement or valuation compression — that would shift the risk-reward balance.