Is It Too Late To Invest In TD Bank After Its 54% Year To Date Surge?

• If you are wondering whether Toronto-Dominion Bank is still attractively priced after its big run up, or if you might be overpaying at today’s price, this breakdown is aimed squarely at that question.
• The stock has climbed 0.9% over the last week, 2.6% over the past month, and is now up 54.5% year to date and 55.4% over the last year, with a 103.6% gain over five years reshaping how investors view its growth and risk profile.
• Investors have been responding to a mix of macro news around interest rate paths and banking sector resilience, as well as TD’s ongoing strategic moves in retail and commercial banking that are seen as supporting its long term earnings power. At the same time, regulatory scrutiny and broader discussions about credit quality have kept a spotlight on how robust the bank’s balance sheet and risk management really are.
• On our framework, Toronto-Dominion Bank scores a 5/6 valuation check for being undervalued, which suggests the market may not be fully pricing in its fundamentals. Next, we will walk through the key valuation approaches investors use today, before circling back to a more holistic way of thinking about fair value at the end of the article.

Toronto-Dominion Bank delivered 55.4% returns over the last year. See how this stacks up to the rest of the Banks industry.

Approach 1: Toronto-Dominion Bank Excess Returns Analysis

The Excess Returns model looks at how much profit Toronto-Dominion Bank can generate above the return investors require, and then capitalizes those surplus returns into an intrinsic value per share.

For TD, the starting point is its equity base, with Book Value at CA$71.48 per share and a Stable Book Value estimate of CA$71.96 per share, based on forecasts from 9 analysts. The bank is expected to earn Stable EPS of CA$9.27 per share, informed by weighted future Return on Equity estimates from 10 analysts, implying an Average Return on Equity of 12.89%.

Investors are assumed to demand a Cost of Equity of CA$5.22 per share. Based on that assumption, the model estimates an Excess Return of CA$4.05 per share, reflecting value created above that required return. Capitalizing these excess returns produces an intrinsic value of about CA$161.93 per share.

With the Excess Returns valuation indicating the stock is roughly 27.0% undervalued versus the current market price, TD appears materially cheap on this fundamental framework.

Result: UNDERVALUED

Our Excess Returns analysis suggests Toronto-Dominion Bank is undervalued by 27.0%. Track this in your watchlist or portfolio, or discover 933 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 Toronto-Dominion Bank.

Approach 2: Toronto-Dominion Bank Price vs Earnings

For a consistently profitable bank like Toronto-Dominion, the price to earnings, or PE, ratio is a useful yardstick because it directly links what investors pay to the earnings the business is already generating. In general, faster growth and lower perceived risk justify a higher PE, while slower growth or higher risk argue for a lower one.

TD currently trades on a PE of about 10.0x, which is slightly below the Banks industry average of roughly 10.5x and well below the broader peer group average of around 15.6x. Simply Wall St also uses a proprietary “Fair Ratio” to estimate what PE a stock should trade on, after adjusting for its earnings growth outlook, profit margins, risk profile, industry and market cap. For TD, that Fair Ratio is 11.3x, which suggests the shares trade on a modestly lower multiple than that estimate.

Because TD’s actual PE sits meaningfully below this 11.3x Fair Ratio, the multiple-based view is consistent with the earlier intrinsic value work and indicates that the stock appears undervalued at current levels.

Result: UNDERVALUED

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1440 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Toronto-Dominion Bank Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, which are simple, story driven views of a company. With Narratives, you connect your perspective on TD’s future revenue, earnings and margins to a concrete financial forecast and fair value estimate, all within an easy tool on Simply Wall St’s Community page that millions of investors use to compare their Narrative Fair Value to today’s price. These Narratives automatically update as new news or earnings arrive. For example, one TD investor might build a cautious Narrative around regulatory headwinds and slower digital adoption that supports a fair value near the lower end of analyst expectations around CA$93 per share. Another, more optimistic investor might emphasize TD’s AI initiatives, cost control and diversified growth to justify a fair value closer to the high end near CA$120 per share. This gives you a dynamic, side by side view of how different stories about the same bank can lead to different but transparent investment decisions.

Do you think there's more to the story for Toronto-Dominion Bank? 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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