Is Bank of Nova Scotia (TSX:BNS) Still Undervalued After Its Recent Share Price Rally?

Recent Performance and Why Bank of Nova Scotia Matters Now

Bank of Nova Scotia (TSX:BNS) has quietly put together a strong run, with shares up about 29% this year and roughly 36% over the past year, outpacing many Canadian bank peers.

See our latest analysis for Bank of Nova Scotia.

That rally looks more like a re-rating than a blip, with a roughly 28.6% year to date share price return and a powerful 92.36% five year total shareholder return. This signals that momentum is building as investors reassess Bank of Nova Scotia’s growth and risk profile.

If strong bank performance has you rethinking your portfolio, this could be a good moment to explore fast growing stocks with high insider ownership as potential next wave opportunities beyond the financial sector.

With the stock hovering near analyst targets but trading at a hefty intrinsic discount, investors now face a key question: is Bank of Nova Scotia still undervalued, or has the market already priced in its next leg of growth?

Most Popular Narrative Narrative: 30% Overvalued

With Bank of Nova Scotia last closing at CA$99.34 against a narrative fair value near CA$99.07, the valuation story hinges on upgraded growth and profitability assumptions.

The analysts have a consensus price target of CA$87.071 for Bank of Nova Scotia based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the more bullish reporting a price target of CA$94.0, and the most bearish reporting a price target of just CA$78.0.

Read the complete narrative.

Want to see what justifies a higher intrinsic value than the analyst target range? The narrative leans on rising margins, faster revenue growth, and a reset profit multiple. Curious which assumptions really do the heavy lifting here?

Result: Fair Value of $99.07 (OVERVALUED)

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

However, risks around Latin American volatility and a potential Canadian housing slowdown could quickly test the optimistic margin and growth assumptions behind this narrative.

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

Another Lens on Value

While the narrative view suggests Bank of Nova Scotia is roughly 30% overvalued at around CA$99, our DCF model tells a very different story. It points to fair value near CA$155.50, or roughly 36% upside. Is the market underestimating long term cash generation, or is the narrative too cautious?

Look into how the SWS DCF model arrives at its fair value.

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 918 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 see the story differently or want to stress test the numbers yourself, you can build a full narrative in minutes: Do it your way.

A great starting point for your Bank of Nova Scotia research is our analysis highlighting 3 key rewards and 1 important warning sign that could impact your investment decision.

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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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