Is Now the Right Moment to Reassess Commerzbank After a 94% Rally This Year?

If you have been eyeing Commerzbank and wondering what is driving its latest rally or what the next move should be, you are not alone. The stock closed at 30.24 recently, marking a 2.0% gain in the last week, but a noticeable -8.0% dip over the past month. Remarkably, if you zoom out a bit, the longer-term growth looks far more striking: up a hefty 94.3% year-to-date and soaring 703.9% over the last five years. These kinds of numbers always grab attention, so let's dig into what is behind them.

In recent months, investor sentiment around German banks has noticeably shifted. For Commerzbank, several moves towards digitalization and cost-cutting have sparked optimism, while sector-wide reforms and a general uptick in the European banking environment add to the positive outlook. At the same time, a stronger focus on sustainable finance has offered a new growth narrative for the bank. However, valuations are rarely as simple as a headline growth number, especially for a stock that has already climbed so high.

On a quick valuation check, Commerzbank earns a score of 3 out of a maximum 6. That means it screens as undervalued in three major areas. But what do these checks really tell us, and are they enough for a confident buy or sell? It is time to break down the main valuation methods and see where Commerzbank stands, before looking at a smart approach that goes even deeper.

Commerzbank delivered 92.1% returns over the last year. See how this stacks up to the rest of the Banks industry.

Approach 1: Commerzbank Excess Returns Analysis

The Excess Returns model focuses on how much profit a company generates over the required return for its equity investors. In essence, it measures whether Commerzbank is earning enough on its invested capital to justify its share price, after taking into account the expected cost of equity.

For Commerzbank, the latest numbers tell an interesting story:

• Book Value: €30.01 per share
• Stable EPS: €3.04 per share
  (Source: Weighted future Return on Equity estimates from 12 analysts.)
• Cost of Equity: €1.79 per share
• Excess Return: €1.25 per share
• Average Return on Equity: 10.31%
• Stable Book Value: €29.47 per share
  (Source: Weighted future Book Value estimates from 6 analysts.)

Based on this method, the intrinsic value per share comes out to €56.23. With the current share price at €30.24, this points to a stock that is roughly 46.2% undervalued. This suggests that Commerzbank is returning much more to shareholders than what is implied by today’s price.

Result: UNDERVALUED

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

Our Excess Returns analysis suggests Commerzbank is undervalued by 46.2%. Track this in your watchlist or portfolio, or discover more undervalued stocks.

Approach 2: Commerzbank Price vs Earnings

For established, profitable companies like Commerzbank, the Price-to-Earnings (PE) ratio is a widely used valuation tool. It shows how much investors are paying for each euro of the company’s earnings, offering a quick, practical lens on value relative to profit generation. Since profit is the bottom line for any major bank, the PE ratio is often seen as a key metric for comparing similar businesses.

What defines a “normal” or “fair” PE ratio can change based on a company’s growth prospects and perceived risk. In general, higher expected earnings growth and lower risk can justify a higher PE, while slower growth or bigger uncertainties usually warrant a lower multiple. Commerzbank currently trades at a PE of 14.02x. By comparison, the average for banks in the same industry stands at 10.27x, and its peer group averages 9.70x. This puts Commerzbank well above most rivals by traditional standards.

Simply Wall St’s proprietary Fair Ratio takes this a step further. Unlike a straight peer or industry comparison, the Fair Ratio incorporates company-specific factors such as earnings growth, margins, risks, market cap, and how the business stacks up within its industry. For Commerzbank, the Fair Ratio is calculated at 14.39x. Since this closely matches the actual PE, it suggests the market is pricing the stock about right, reflecting the company’s strengths and risks in a balanced way.

Result: ABOUT RIGHT

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 Commerzbank Narrative

Earlier, we mentioned there is an even better way to understand valuation, so let’s introduce you to Narratives, a smarter and more dynamic approach now available on Simply Wall St’s platform.

A Narrative connects the story you believe about a company, such as Commerzbank’s digital transformation or its leadership in sustainable finance, with your own forecasts and fair value estimates. Instead of just analyzing numbers, Narratives enable you to describe how you think the business will perform, link those beliefs directly to a financial outcome, and compare your fair value to the current share price. This process allows investment decisions to be much more personal and informed.

Anyone can access Narratives on the Simply Wall St Community page, where millions of investors share their perspectives. The best part is that Narratives update automatically as new news, earnings, or data arrive, helping to keep your analysis relevant and timely.

Imagine two investors analyzing Commerzbank: one might believe digital banking will drive strong future profits and set a fair value at €36.10, while another is cautious about economic headwinds and values the bank at €21.00. Narratives let you see both perspectives and decide for yourself, providing clarity, context, and a more actionable investment process.

Do you think there's more to the story for Commerzbank? 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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