Is It Too Late To Consider National Bank of Canada After Its Strong 2025 Rally?

• If you are wondering whether National Bank of Canada is still worth considering after such a strong run, or if most of the upside is already priced in, this breakdown is for you.
• The stock has climbed 1.0% over the last week, 9.9% over the past month, and is now up 32.4% year to date and 33.6% over the last year, building on gains of 106.4% over three years and 187.7% over five years.
• Recently, investors have been reacting to a mix of macro news around interest rate expectations and tighter capital rules for banks. Both of these factors shape how profitable a lender like National Bank of Canada can be over the long term. There has also been ongoing commentary about the resilience of the Canadian housing market and consumer credit quality, which helps explain why sentiment toward the big banks has stayed constructive rather than turning defensive.
• Despite all that momentum, National Bank of Canada only scores 2/6 on our valuation checks. This suggests some metrics flag it as undervalued while others look more demanding. Next we will walk through those valuation approaches in detail and then finish with a more holistic way to think about what the stock is really worth.

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

Approach 1: National Bank of Canada Excess Returns Analysis

The Excess Returns model looks at how much profit a bank can earn above its cost of equity and then projects how long those superior returns can be sustained. Instead of focusing on short term earnings, it asks whether National Bank of Canada can keep compounding shareholder value faster than its required return.

For National Bank of Canada, the model assumes a Book Value of CA$82.22 per share and a Stable EPS of CA$13.17 per share, based on weighted future Return on Equity estimates from 10 analysts. With an Average Return on Equity of 15.11% and a Cost of Equity of CA$6.32 per share, the bank is expected to generate Excess Return of CA$6.85 per share. Stable Book Value is projected at CA$87.15 per share, using estimates from 8 analysts.

Putting these inputs together, the Excess Returns valuation implies an intrinsic value of about CA$239.45 per share, which is roughly 27.8% above the current market price. On this basis, National Bank of Canada stock currently appears undervalued according to this model.

Result: UNDERVALUED

Our Excess Returns analysis suggests National Bank of Canada is undervalued by 27.8%. Track this in your watchlist or portfolio, or discover 895 more undervalued stocks based on cash flows.

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

Approach 2: National Bank of Canada Price vs Earnings

For consistently profitable companies like National Bank of Canada, the price to earnings (PE) ratio is a practical way to gauge what investors are willing to pay for each dollar of current earnings. It naturally reflects both how quickly profits are expected to grow and how risky those earnings are, since faster growth and lower risk usually justify a higher PE multiple, while slower growth or higher uncertainty call for a lower one.

National Bank of Canada currently trades on a PE of 17.51x. That is well above the broader Banks industry average of about 10.63x, and also ahead of its peer group, which sits around 14.24x. To go a step further than these simple comparisons, Simply Wall St calculates a proprietary “Fair Ratio” for the stock, which in this case is 13.50x.

The Fair Ratio is designed to be a more tailored benchmark than a basic industry or peer average because it factors in the company’s own earnings growth outlook, risk profile, profit margins, industry positioning and market capitalization. Comparing the current PE of 17.51x to the Fair Ratio of 13.50x suggests that the shares are trading at a premium to what those fundamentals would normally justify.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your National Bank of Canada Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple but powerful framework on Simply Wall St’s Community page that lets you connect your view of National Bank of Canada’s story to explicit forecasts for revenue, earnings and margins. You can then link these to a Fair Value that you compare with today’s share price to decide whether to buy, hold or sell. That Fair Value updates automatically as fresh news or earnings arrive so your thesis stays current. In practice, one investor might build a bullish Narrative that assumes successful integration of Canadian Western Bank, sustained double digit revenue growth and a premium future PE closer to 24x, arriving at a Fair Value around CA$168. A more cautious investor might model slower loan growth, tighter margins and a lower multiple closer to the most bearish analyst target of about CA$113. Narratives makes it easy to see those different perspectives side by side and choose the one that best reflects your own expectations.

Do you think there's more to the story for National Bank of Canada? Head over to our Community to see what others are saying!

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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