Assessing Raiffeisen Bank After Its 82% Rally and Central Europe Market Shifts

If you’re wondering whether it’s the right moment to buy, hold, or steer clear of Raiffeisen Bank International, you’re not alone. The stock has been capturing the attention of both new investors and seasoned market-watchers, thanks to its rollercoaster performance over the past few years. With a closing price of 29.66 and a jaw-dropping 82.4% gain over the past twelve months, those who stayed along for the ride are sitting on impressive returns. However, a drop of 5.4% in the last 30 days reminds us that even strong momentum can face bumps along the way.

Part of the recent price action reflects shifting risk perceptions in the broader financial sector, along with headlines surrounding market developments that could reshape bank performance in Central and Eastern Europe. The 4.7% climb within just the past week hints that optimism is not in short supply, though some investors are keeping a cautious eye on the volatility.

Looking at the company’s valuation score, which comes in at 2 on a 6-point scale of undervaluation checks, it suggests that Raiffeisen Bank International is undervalued in some, but not all, key measures. Is the growing share price justified, or is the market getting ahead of itself?

Let's break down the different approaches to valuing the company and see how well they reflect what’s happening here. Stay tuned, as we’ll also reveal a more insightful way to think about Raiffeisen’s true worth by the end of this article.

Raiffeisen Bank International scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Raiffeisen Bank International Excess Returns Analysis

The Excess Returns valuation model evaluates a bank by looking at how much profit it generates above and beyond its cost of equity capital. Instead of just considering earnings, this approach focuses on whether Raiffeisen Bank International is actually delivering value to shareholders when compared to what it costs to finance its equity.

For Raiffeisen Bank International, here are the key figures:

• Book Value: €60.65 per share
• Stable EPS: €5.89 per share
  (Source: Weighted future Return on Equity estimates from 9 analysts.)
• Cost of Equity: €4.65 per share
• Excess Return: €1.24 per share
• Average Return on Equity: 8.88%
• Stable Book Value: €66.37 per share
  (Source: Weighted future Book Value estimates from 4 analysts.)

Based on the model’s projections, the fair value estimate comes in at €90.35 per share. Compared to the recent closing price of €29.66, this suggests Raiffeisen Bank International is trading at a 67.2% discount to intrinsic value. This points to a stock that is significantly undervalued in the market right now.

Result: UNDERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Raiffeisen Bank International.

Our Excess Returns analysis suggests Raiffeisen Bank International is undervalued by 67.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Raiffeisen Bank International Price vs Earnings

The Price-to-Earnings (PE) ratio is a widely used valuation metric for profitable companies because it allows investors to compare what the market is willing to pay for each euro of earnings. It is particularly helpful for banks like Raiffeisen Bank International, where steady profits are central to long-term value. However, it is important to remember that a "normal" or "fair" PE ratio varies depending on a company’s expected growth, risk profile, and the resilience of its earnings. Companies with higher growth or stronger balance sheets often command a higher PE, while those with higher risks or weaker growth usually trade at a lower multiple.

Currently, Raiffeisen Bank International is trading at a PE ratio of 15.7x. This is above the average PE for its industry, which sits at 10.4x, and also higher than the peer group average of 12.7x. At first glance, this premium could prompt concerns about the stock’s valuation. However, a more tailored benchmark comes from Simply Wall St's proprietary "Fair Ratio." This metric incorporates the company’s earnings growth, industry conditions, profit margins, risks, and relative size to deliver a more precise multiple for comparison. In Raiffeisen Bank International's case, the Fair PE Ratio is calculated at 13.3x.

Comparing these numbers, Raiffeisen Bank International's actual PE ratio of 15.7x is modestly higher than its Fair Ratio, suggesting the shares are priced a bit above what current fundamentals would justify. This points to the stock being somewhat expensive relative to its risk-reward profile and sector trends.

Result: OVERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Raiffeisen Bank International Narrative

Earlier we mentioned that there's an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a story you create about a company, reflecting your perspective on its future based on assumptions around its fair value, revenue, earnings, and margins. Narratives link this story to a financial forecast and, ultimately, to a fair value, helping you see how your expectations play out in the numbers.

Narratives are easy to use and accessible on the Simply Wall St Community page, where millions of investors create and compare their own perspectives. With a Narrative, you can dynamically see whether you would buy or sell by comparing your calculated Fair Value to the current Price. Since Narratives update automatically when new information arrives, they always reflect the latest news, results, and developments.

For example, right now some investors forecast robust digital transformation and profit margin expansion for Raiffeisen Bank International, resulting in fair values as high as €31.0, while others apply more cautious assumptions about risks and assign fair values as low as €22.0. Narratives allow you to easily model your outlook and make smarter, quicker decisions as new data emerges.

Do you think there's more to the story for Raiffeisen Bank International? Create your own Narrative to let the Community know!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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