WaFd (WAFD): Is the Bank Undervalued After Its Recent Share Price Decline?

WaFd (WAFD) has caught investor attention with its recent stock movement, as shares have tracked a downward path over the past month. This shift provides a fresh opportunity to explore the company’s underlying fundamentals and valuation.

See our latest analysis for WaFd.

Over the past year, WaFd’s share price has declined steadily. Momentum has faded as the year-to-date price return sits at -10.48% and the latest close at $28.61. The total shareholder return over the past twelve months stands at -17.20%, highlighting a tough period despite prior multi-year gains. Recent drops could signal the market reassessing growth prospects or risk in the current environment.

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Given WaFd’s downbeat momentum and discounted valuation, does this suggest an overlooked buying opportunity for patient investors, or is the market accurately valuing the bank’s prospects for future growth?

Price-to-Earnings of 10.6x: Is it justified?

WaFd’s stock currently trades at a price-to-earnings (P/E) ratio of 10.6x based on its recent closing price of $28.61, putting it at a discount to both the US Banks industry average (11.3x) and its peer group (12.6x). This suggests that the market may be undervaluing WaFd’s future earnings relative to similar banks.

The price-to-earnings ratio captures how much investors are willing to pay for each dollar of the company’s current profits. For banks like WaFd, this ratio is a widely used metric to compare value and earnings power within the industry.

Trading below not just the industry and peer averages, but also below the estimated fair P/E of 12.4x, WaFd’s lower multiple implies caution or missed recognition by investors despite its strong earnings growth and robust profit margins. If market sentiment improves or the company continues to deliver, there is room for re-rating toward the fair ratio level indicated by broader financial modeling.

Explore the SWS fair ratio for WaFd

Result: Price-to-Earnings of 10.6x (UNDERVALUED)

However, persistent negative returns and market caution could signal that investor concerns about growth prospects or industry headwinds are not fully priced in.

Find out about the key risks to this WaFd narrative.

Another View: Discounted Cash Flow Model Suggests Deeper Value

Our SWS DCF model offers a different perspective. It estimates WaFd’s fair value at $52.88, which is significantly higher than the current share price of $28.61. This suggests WaFd could be undervalued by a substantial margin. Could the market be overlooking something with this much potential upside?

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 have a different viewpoint or enjoy digging into the numbers yourself, you can craft your own perspective in just a few minutes. Do it your way

A good starting point is our analysis highlighting 5 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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