Bank of Queensland (ASX:BOQ) Share Price Near $8: What's the Value Behind It?

July 04, 2025 05:27 PM AEST | By Team Kalkine Media

Bank of Queensland (ASX:BOQ) Share Price Near $8: What's the Value Behind It? — Image source: Shutterstock

Understanding PE-Based Valuation

A commonly used approach is the price-to-earnings (PE) ratio. For Bank of Queensland, the PE ratio stands at 19.1x, using its FY24 earnings per share (EPS) of $0.41 and the current share price of $7.83. This compares closely with the sector average of 19x. By multiplying BOQ’s EPS by the sector average PE ratio, the implied valuation arrives at approximately $7.82. This suggests that the market price is relatively aligned with sector expectations.

Dividend Discount Model Insights

Another widely adopted valuation approach for bank stocks is the Dividend Discount Model (DDM). This model values a stock based on its expected future dividend payments. Assuming BOQ maintains or modestly grows its annual dividend of $0.34, and applying a blended risk rate ranging between 6% to 11%, the valuation range spans from $7.19 to $7.40. When using an adjusted dividend figure of $0.35, the valuation edges higher.

Considering franking credits available to eligible investors, the gross dividend projection is around $0.50. Factoring this into the DDM formula, the valuation increases significantly to $10.57. This highlights the importance of dividend assumptions and tax benefits in assessing the stock’s potential.

Sector Overview and Broader Context

Bank stocks like BOQ remain a focal point for Australian investors due to the financial sector’s established role in income portfolios. The industry features strong players such as Westpac (ASX:WBC) and Bendigo and Adelaide Bank (ASX:BEN), offering context for comparison. Notably, Bank of Queensland is not a part of the ASX 100 companies, which include the nation’s largest and most traded firms. This positioning may affect BOQ's visibility in large-cap-focused investment strategies.

While valuation models provide useful benchmarks, they should serve as starting points rather than definitive answers. Investors looking into Bank of Queensland would benefit from evaluating the bank’s income sources—whether interest-based lending or fee-based services—and aligning this with macroeconomic trends such as unemployment rates and consumer confidence. As always, assessing a company’s strategic direction and management decisions adds depth to any financial analysis.

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