A Look at Bank of Qingdao (SEHK:3866) Valuation After Earnings Boost and Rising Investor Interest

Bank of Qingdao (SEHK:3866) just revealed its earnings for the nine months ended September, showing higher net interest income and net profit compared to last year. This improvement in profitability is sparking new attention from investors.

See our latest analysis for Bank of Qingdao.

The latest earnings boost seems to have fueled confidence in Bank of Qingdao, with the share price up 45% year to date. Looking at the bigger picture, the bank’s one-year total shareholder return is an impressive 53%, and the three-year total return has now doubled. Momentum is clearly building as investors increasingly recognize the improving fundamentals.

If this earnings momentum has you curious about other potential standouts, it could be the perfect time to broaden your outlook and discover fast growing stocks with high insider ownership

But after such strong gains and improved fundamentals, is the stock still trading at a compelling value, or has the recent surge already factored in future growth, leaving little room for new buyers?

Price-to-Earnings of 5x: Is it justified?

With Bank of Qingdao trading at a price-to-earnings ratio of just 5x, the stock looks attractively valued relative to its recent closing price and sector benchmarks.

The price-to-earnings (P/E) ratio reflects the market’s expectations for a company’s future earnings by comparing its current share price to its per-share earnings. For banks like Bank of Qingdao, a lower P/E can indicate the market is underestimating the company’s ongoing profitability or is cautious about future growth. In this case, the 5x P/E suggests shares are priced cheaply for the level of earnings being generated, especially after the recent earnings report.

Notably, this valuation stands out against both industry averages and peer group comparisons. Bank of Qingdao’s P/E sits well below the Hong Kong Banks industry average of 6x and the peer average of 7.6x. Even when compared to the estimated fair P/E ratio of 6.8x, the current multiple remains compelling and may offer investors an entry point that the market could eventually re-rate upwards if growth sustains or improves.

Explore the SWS fair ratio for Bank of Qingdao

Result: Price-to-Earnings of 5x (UNDERVALUED)

However, weaker revenue growth momentum or unexpected changes in market sentiment could quickly challenge the current optimism surrounding Bank of Qingdao’s valuation.

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

Another Perspective: Discounted Cash Flow Model

Looking beyond share price multiples, the SWS DCF model estimates Bank of Qingdao's fair value to be HK$5.65, nearly 28% above the current price of HK$4.09. This suggests shares may be significantly undervalued and could offer long-term upside if forecasts are met. However, can this model's assumptions hold up in the real world?

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 Qingdao 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 865 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 Qingdao Narrative

If you have a different perspective or want to dig deeper into the numbers, you can easily build your own view in just a few minutes. Do it your way.

A great starting point for your Bank of Qingdao research is our analysis highlighting 4 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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