Assessing Scotiabank (TSX:BNS) Valuation After Recent Share Price Gains

Bank of Nova Scotia (TSX:BNS) has been catching some attention lately as investors digest its latest run-up in price. With shares now trading around CA$78.53, there isn’t a single headline-grabbing event to pin this move on. However, the steady gains have some wondering if the shift signals renewed optimism about the bank’s future prospects. Whether you’re already holding BNS or just tracking Canadian bank stocks, this could be a good moment to take a closer look at what is really driving the action and where value might lie.

Looking at the bigger picture, Bank of Nova Scotia’s story over the past year has reflected something of a turnaround. The stock is up 28% in the past 12 months, with momentum building over the past month and the past three months. This rise has outpaced its recent average annual performance, a period in which the stock lagged its peers for quite some time. At the same time, fundamentals have quietly improved, with both revenue and net income posting healthy annual growth.

After this year’s jump, the question for investors is whether Bank of Nova Scotia is trading at a rare discount, or if markets are already pricing in all the expected growth. Here is a closer look at the valuation.

Most Popular Narrative: 1.5% Undervalued

According to community narrative, Bank of Nova Scotia is currently viewed as slightly undervalued relative to its fair value. The consensus leans on optimistic forward-looking expectations driven by growth initiatives and robust operational improvements.

The institution's emphasis on multiproduct client growth and initiatives like Mortgage+ and Scene+ are driving increased client acquisition and retention. This is expected to boost revenue per client and noninterest income. The strategic focus on expanding advisory and Global Banking and Markets operations demonstrates potential for continued strong performance in capital markets and advisory revenues. As a result, this contributes to noninterest income and overall earnings stability.

What exactly is fueling this nearly “fair” value? The narrative is built on bold forecasts for revenue, earnings, and future profitability, as well as a projected valuation multiple that hints at potential upside. Want to see the surprising underlying assumptions and the numbers that back them up? There is more to this story than the share price suggests.

Result: Fair Value of $79.73 (UNDERVALUED)

Have a read of the narrative in full and understand what's behind the forecasts.

However, this outlook could change if credit losses increase further or if economic uncertainty continues to put pressure on the bank’s net margins and earnings.

Find out about the key risks to this Bank of Nova Scotia narrative.

Another View: Multiples Suggest a Cautious Stance

While the community narrative points to value, our look at how the company is priced compared to others in its sector paints a different picture. By this measure, Bank of Nova Scotia actually looks expensive. Could these market expectations be out of step with near-term realities?

See what the numbers say about this price — find out in our valuation breakdown.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Bank of Nova Scotia for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own Bank of Nova Scotia Narrative

If you have your own perspective or want to dig into the numbers independently, you can easily assemble your own view of Bank of Nova Scotia in just a few minutes. do it your way.

A good starting point is our analysis highlighting 3 key rewards investors are optimistic about regarding Bank of Nova Scotia.

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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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