UBS

We rate UBS Group AG (UBS) as a Hold with a composite score of 51.8/100 at a current price of $41.20. 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 (71th percentile) and investment (70th percentile), which together account for the majority of the composite score. Offsetting weakness in quality (31th percentile) and stability (48th percentile) tempers our overall conviction. We assign a No Moat rating (38/100), High uncertainty, and Standard capital allocation.

Key items to watch: whether strong momentum is fundamentally supported by revenue trends; balance sheet deleveraging progress. 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.

UBS Group AG 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 51.8/100 places it at rank #1711 in our full 7,333-stock universe. With a $101.7B market capitalization, UBS Group AG operates at meaningful scale within the Finance, Insurance, And Real Estate sector, providing competitive advantages in distribution, procurement, and customer reach.

The outlook is moderately positive, with revenue expanding at 1% and favorable momentum (71th percentile) reflecting constructive market sentiment. The business shows steady execution, though the growth rate is below the levels typically associated with high-conviction growth stories. Momentum confirmation provides support for the current price level.

The margin cascade tells an important story: gross margins of 15% (-61.9pp vs sector) narrow to operating margins of 84% (+67.2pp vs sector) and net margins of 10.6%, yielding a gross-to-net conversion rate of 72%. This efficient conversion suggests well-controlled operating costs and limited margin leakage between the gross and net levels.

At a current price of $41.20, UBS Group AG is trading near fair value based on current fundamentals. Our value factor score of 64/100 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 a P/E of 26.1x (a 119% premium to the sector median of 11.9x), EV/EBITDA of 6.6x (near the sector median), P/B of 1.6x, P/S of 0.7x. The above-sector P/E multiple suggests the market is pricing in superior growth or quality, which our analysis finds only partially justified by current fundamentals.

We assign a High uncertainty rating to UBS Group AG. Key risk factors include significant leverage (454% debt-to-equity), weak quality scores (31th percentile). The wide range of potential outcomes widens our fair value estimate and increases the possibility of permanent capital impairment. Investors considering this name should size positions accordingly and demand a meaningful margin of safety before initiating.

Specific risk factors that inform our assessment include: significant leverage (454% debt-to-equity); 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 48th percentile and quality factor at the 31th percentile provide a quantitative summary of the overall risk landscape.

Key risk mitigants include: large-cap scale ($101.7B) provides resilience; a 2.38% dividend yield anchors total return. These factors partially offset the identified risks and provide downside protection in adverse scenarios. On balance, the risk-reward profile warrants caution and disciplined position management.

We rate UBS Group AG's capital allocation as Standard. Management has shown adequate — though not exceptional — stewardship of shareholder capital. Returns on equity stand at 24.2%, and the balance sheet is managed within acceptable parameters (D/E: 454%). Exemplary allocators typically sustain ROE above 20% and D/E below 50%; UBS Group AG falls short on at least one dimension.

There is room for improvement in optimizing the capital structure or enhancing shareholder returns. The 2.38% dividend yield provides some income return, but the overall capital allocation framework would benefit from either higher reinvestment returns, improved balance sheet efficiency, or increased shareholder distributions. We will monitor for signs of strategic improvement that could warrant an upgrade.

In summary, UBS Group AG receives a Hold rating with a composite score of 51.8/100 (rank #1711 of 7,333). Our quantitative framework assigns a No Moat (38/100, trend: stable), High uncertainty, and Standard capital allocation. The average factor score across quality, value, momentum, stability, and investment is 57/100.

Our analysis supports a neutral stance on UBS Group AG. 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.