RY

We rate ROYAL BANK OF CANADA (RY) as a Hold with a composite score of 58.8/100 at a current price of $170.63. 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 (85th percentile) and stability (83th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (32th percentile) and investment (52th percentile) tempers our overall conviction. We assign a Narrow Moat rating (49/100), Low uncertainty, and Exemplary capital allocation.

Key items to watch: sustainability of the current growth rate. 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.

ROYAL BANK OF CANADA holds a top-quartile position (#0 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 58.8/100 places it at rank #806 in our full 7,333-stock universe. As a mega-cap company with a $207.3B market capitalization, ROYAL BANK OF CANADA benefits from significant scale, distribution networks, and brand recognition that smaller competitors cannot easily replicate.

The near-term outlook is constructive, with revenue growing at 22% and momentum in the 85th percentile confirming positive market sentiment and institutional accumulation. The combination of strong top-line growth and favorable price dynamics suggests the company is executing well on its growth strategy. Investment factor at the 52th percentile indicates reinvestment patterns that investors should monitor for sustainability.

The margin cascade tells an important story: gross margins of 92% (+15.6pp vs sector) narrow to operating margins of 8% (-9.1pp vs sector) and net margins of 56.4%, yielding a gross-to-net conversion rate of 61%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $170.63, ROYAL BANK OF CANADA is trading near fair value based on current fundamentals. Our value factor score of 58/100 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 2.9x (discounted to peers), P/B of 2.4x, P/S of 2.3x. We evaluate these multiples in the context of both absolute levels and sector-relative positioning to form our valuation view.

We assign a Low uncertainty rating to ROYAL BANK OF CANADA. The company exhibits strong financial stability with a beta of 0.57, conservative leverage (36% D/E), and a stability factor in the 83th percentile. The predictable nature of the business model and solid financial position reduce the range of potential outcomes, giving us confidence in our fair value estimate.

Specific risk factors that inform our assessment include: weak quality scores (32th percentile); low beta of 0.57 — while defensive, this may indicate limited upside participation in bull markets. 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 83th percentile and quality factor at the 32th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: healthy gross margins of 92% provide a buffer against cost pressures; above-average stability (83th percentile) suggests predictable business dynamics; large-cap scale ($207.3B) 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 ROYAL BANK OF CANADA's capital allocation as Exemplary. Management demonstrates a strong track record of balancing reinvestment with shareholder returns, evidenced by returns on equity of 58.6%, disciplined leverage (36% D/E), a 2.95% dividend yield. Exemplary allocators typically generate returns on equity above 20% while maintaining debt-to-equity below 50% — ROYAL BANK OF CANADA 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 2.95% dividend yield, and the combination of 3.5% 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, ROYAL BANK OF CANADA receives a Hold rating with a composite score of 58.8/100 (rank #806 of 7,333). Our quantitative framework assigns a Narrow Moat (49/100, trend: stable), Low uncertainty, and Exemplary capital allocation. The average factor score across quality, value, momentum, stability, and investment is 62/100.

Our analysis supports a neutral stance on ROYAL BANK OF CANADA. 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.