Are Bendigo & Adelaide Bank (ASX:BEN) Shares Undervalued? Here's What Valuation Models Indicate

April 30, 2025 04:44 PM AEST | By Team Kalkine Media

Are Bendigo & Adelaide Bank (ASX:BEN) Shares Undervalued? Here's What Valuation Models Indicate — Image source: Shutterstock

Peer Comparison via P/E Ratio

The P/E ratio is a widely-used tool that compares a company’s share price to its annual earnings per share (EPS). With BEN’s latest EPS standing at $0.87 and its current share price at $11.14, the calculated P/E ratio is around 12.8x. This stands noticeably below the banking sector average P/E of 18x, suggesting that BEN could be trading at a discount relative to peers such as Macquarie Group (ASX:MQG) and Bank of Queensland (ASX:BOQ).

Applying the sector-average P/E to BEN’s EPS gives a theoretical valuation of approximately $15.47. This comparison-based approach suggests potential for the stock to move higher if its performance aligns more closely with the broader sector.

Dividend Discount Model Analysis

The DDM takes a forward-looking approach, using dividends rather than earnings to determine value. This model is particularly effective for stable and mature sectors like banking, where consistent dividend payouts are the norm.

Using BEN’s most recent annual dividend of $0.63, and assuming a modest 2% growth with a discount rate between 6% and 11%, the average valuation from the DDM stands at about $13.32. If we slightly adjust the dividend to $0.65, the model suggests a valuation of $13.75.

Importantly, since BEN’s dividends are fully franked, including franking credits brings the gross dividend to $0.93. When this gross figure is used in the DDM formula, the share valuation increases to $19.64, which significantly exceeds the current trading price.

What It Means for Investors

Valuation models offer helpful insights, especially when gauging stocks within relatively stable industries like banking. While no model provides perfect forecasts, the numbers suggest that BEN shares may be trading below their estimated fair value.

Those tracking the ASX200 index might find BEN’s position particularly interesting given its historical stability and dividend performance. Whether one is reviewing BEN through a lens of fundamental ratios or dividend potential, both approaches indicate room for upside—though further analysis into lending growth and financial statement trends would add greater clarity.

Disclaimer

The content, including but not limited to any articles, news, quotes, information, data, text, reports, ratings, opinions, images, photos, graphics, graphs, charts, animations and video (Content) is a service of Kalkine Media Pty Ltd (Kalkine Media, we or us), ACN 629 651 672 and is available for personal and non-commercial use only. The principal purpose of the Content is to educate and inform. The Content does not contain or imply any recommendation or opinion intended to influence your financial decisions and must not be relied upon by you as such. Some of the Content on this website may be sponsored/non-sponsored, as applicable, but is NOT a solicitation or recommendation to buy, sell or hold the stocks of the company(s) or engage in any investment activity under discussion. Kalkine Media is neither licensed nor qualified to provide investment advice through this platform. Users should make their own enquiries about any investments and Kalkine Media strongly suggests the users to seek advice from a financial adviser, stockbroker or other professional (including taxation and legal advice), as necessary. Kalkine Media hereby disclaims any and all the liabilities to any user for any direct, indirect, implied, punitive, special, incidental or other consequential damages arising from any use of the Content on this website, which is provided without warranties. The views expressed in the Content by the guests, if any, are their own and do not necessarily represent the views or opinions of Kalkine Media. Some of the images/music that may be used on this website are copyright to their respective owner(s). Kalkine Media does not claim ownership of any of the pictures displayed/music used on this website unless stated otherwise. The images/music that may be used on this website are taken from various sources on the internet, including paid subscriptions or are believed to be in public domain. We have used reasonable efforts to accredit the source wherever it was indicated as or found to be necessary.