Unlocking the Value: A Simple Look at Westpac (ASX:WBC) Share Price

June 16, 2025 01:14 PM AEST | By Team Kalkine Media

Unlocking the Value: A Simple Look at Westpac (ASX:WBC) Share Price — Image source: Shutterstock

The P/E Ratio Comparison Method

The Price-to-Earnings ratio (P/E) remains a standard valuation metric. It compares the current share price to the company’s earnings per share (EPS). Westpac reported an EPS of $1.92 for FY24, placing its P/E at approximately 17.3x with a share price of $33.13. When compared to the sector average of 19x, this suggests Westpac could be trading at a relative discount.

Applying sector-average logic—where earnings are multiplied by the sector P/E—results in a price estimation of around $36.48. This method assumes that a bank with earnings similar to Westpac should ideally be priced near the broader banking sector average.

Similar comparisons can be drawn with peers like Bank of Queensland (ASX:BOQ) and National Australia Bank (ASX:NAB), especially given how central banks are within the Australian equity landscape, representing a significant portion of the ASX by market capitalisation.

Dividend Discount Model (DDM) Approach

Since banks like Westpac are known for consistent dividend payments, another reliable valuation method is the DDM. This model factors in expected dividends and applies a risk-adjusted return to derive a theoretical share value.

Using Westpac’s FY24 dividend of $1.66 and assuming steady dividend growth, this approach produces a valuation near $35.10. An alternative, more conservative dividend estimate of $1.61 gives a result of $34.05.

Importantly, when including franking credits (which boost income for eligible shareholders), the grossed-up dividend of $2.30 drives a valuation closer to $48.64.

While both models offer useful perspectives, they serve as starting points. Understanding the broader context—such as management quality, financial statements, and sector dynamics—is essential. Combining these quantitative tools with qualitative analysis helps form a more complete picture of where shares like Westpac (ASX:WBC) may be heading.

For investors evaluating dividend banking shares, applying both comparative and income-based valuation frameworks offers a well-rounded perspective grounded in fundamentals.

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.