The easiest way to value the BOQ share price

Core Viewpoint - The article discusses the valuation of Bank of Queensland Limited (BOQ) shares, emphasizing the importance of using multiple valuation methods to assess whether the current share price of approximately $7 is justified. Valuation Methods - Two simple valuation tools are introduced for assessing bank shares like BOQ, Bendigo & Adelaide Bank Ltd, and Westpac Banking Corp, which collectively represent about one-third of the Australian stock market by market capitalization [2][3]. - The Price-to-Earnings (PE) ratio is a fundamental metric used to compare a company's share price to its earnings per share, with a lower PE ratio often indicating a potentially undervalued stock [4][5]. - The current PE ratio for BOQ is calculated at 17.1x, compared to the banking sector average of 19x, suggesting that BOQ may be undervalued relative to its peers [6]. Dividend Discount Model (DDM) - The Dividend Discount Model (DDM) is highlighted as a suitable method for valuing BOQ shares, which typically have a history of paying dividends [7][8]. - The DDM valuation formula is provided, which incorporates the last full-year dividend and assumptions about future dividend growth and risk rates [9][10]. - Using various growth and risk rate assumptions, the DDM yields a valuation range for BOQ shares from $4.38 to $17.50, depending on the growth rate and risk rate applied [13]. Adjusted Valuation - An adjusted valuation based on a gross dividend payment, including franking credits, results in a higher valuation of $10.57 for BOQ shares, compared to the current share price of $7.01 [12]. - The expected dividend payment of $0.50 is used in this adjusted calculation, indicating the potential for higher returns for eligible shareholders [12]. Research and Analysis Practices - The article emphasizes the importance of thorough research, including reviewing at least three years of annual reports and analyzing management's communication style to form a well-rounded investment thesis [14]. - Engaging with diverse analytical perspectives is recommended to enhance understanding and avoid costly investment mistakes [15].