WaFd (WAFD): Evaluating the Stock’s Value After Powell’s Rate Comments and a Standout Earnings Report

If you’ve been keeping an eye on WaFd (WAFD), the recent surge in its stock price might have given you a reason to pause and wonder what’s behind the rally. Two main factors have investors buzzing: first, Federal Reserve Chair Jerome Powell’s unexpectedly dovish remarks at the Jackson Hole symposium, which hinted at the possibility of lower interest rates ahead. Second, WaFd has just turned in a quarterly earnings report that checked many boxes by beating expectations on revenue, earnings per share, and net interest income, while peers in the mortgage finance sector struggled to do the same.

This string of news comes after a year where WaFd shares haven’t exactly been market leaders, with the stock dipping around 10% over the past 12 months. But recently there’s been some momentum. Shares climbed nearly 7% in the last month and almost 10% over the past 3 months, following a positive performance update and the regular dividend affirmation. That rebound stands out, especially as the sector at large had a tougher quarter. WaFd also highlighted its strengths in credit quality and customer service in talks with investors this summer.

With the market clearly responding to a friendlier rate outlook and WaFd’s steady hand, some investors may now be wondering if there is still an opportunity, or if the potential upside has already been priced in.

Price-to-Earnings of 11.8x: Is it justified?

WaFd currently trades at a price-to-earnings (P/E) ratio of 11.8x, which matches the average for US banks and is lower than the peer average of 13.5x. This indicates the stock is valued in line with its banking sector while trading at a discount compared to its closest peers.

The price-to-earnings ratio measures what investors are willing to pay today for each dollar of company earnings. For a bank like WaFd, it offers a quick comparison to the industry and competitors by reflecting expectations about future profitability.

Given steady earnings growth and improving profit margins, WaFd’s current valuation appears justified when compared to the sector. However, the P/E ratio suggests that although the market recognizes stable performance, it is not currently assigning a premium for exceptional growth prospects.

Result: Fair Value of $31.73 (ABOUT RIGHT)

See our latest analysis for WaFd.

However, slower annual revenue growth or unexpected shifts in interest rates could quickly challenge WaFd’s current momentum and fair value story.

Find out about the key risks to this WaFd narrative.

Another View: What Does the DCF Model Indicate?

Looking at the SWS DCF model, a different picture emerges for WaFd. This approach suggests the stock may be trading at a substantial discount to its intrinsic value. This raises questions about the limits of traditional valuation ratios. Which perspective will the market trust going forward?

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 WaFd 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 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 WaFd Narrative

If you see things differently or would rather dive into the numbers on your own, you can create your personal view in just a few minutes, or simply do it your way.

A good starting point is our analysis highlighting 4 key rewards investors are optimistic about regarding WaFd.

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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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