Two Simple Valuation Techniques for This ASX200 Stock Reveal Upside Potential

May 16, 2025 05:03 PM AEST | By Team Kalkine Media

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Highlights

Simple valuation tools applied to (BEN)

Sector comparison reveals valuation gap

Dividend discount model points to higher pricing

Bendigo and Adelaide Bank (ASX:BEN), a notable ASX200 stock, continues to attract investor attention with its steady performance in Australia’s banking sector. As of now, its share price trades near $11.77, placing it among the most actively watched names on the Australian market.

With banking institutions making up a significant portion of the S&P/ASX200 index, understanding how to evaluate a bank stock like (BEN) can be useful. Here are two straightforward valuation methods that provide a clearer view of where the company’s share price could be headed.

Price-to-Earnings (PE) Ratio Comparison

The PE ratio compares the market price of a share with its earnings per share (EPS), offering a lens through which relative value can be assessed. For (BEN), the latest earnings per share sit at $0.87. This results in a PE ratio of roughly 13.5x when using the current share price of $11.77.

Compared to the broader banking sector average PE of 18x, this indicates (BEN) is currently priced lower than many of its peers. By adjusting its valuation based on this sector average, multiplying the EPS of $0.87 by 18 gives a notional share value of $15.72—suggesting potential room for further growth.

Dividend Discount Model (DDM) Insights

Dividends are central to many investors focused on ASX dividend stocks, especially in the banking sector. The Dividend Discount Model (DDM) is widely used to value such dividend-paying stocks.

Based on last year’s dividend of $0.63 and applying a conservative risk rate and dividend growth estimate, this method suggests a valuation of around $13.32. If an adjusted dividend of $0.65 is considered, this moves closer to $13.75.

Taking it a step further, using a grossed-up dividend figure of $0.93 (accounting for franking credits), the valuation jumps to approximately $19.64 per share. This underlines the appeal of fully franked dividend payers among ASX dividend stocks.

While simple valuation tools like PE ratios and DDM don’t replace deep research, they offer a solid starting point for understanding how (BEN) fits into the broader banking sector and S&P/ASX200 landscape. For investors tracking ASX200 stocks, these models highlight the importance of earnings consistency and dividend strength in shaping market expectations.

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