Are BOQ shares good value? 2 ways to value them

Core Viewpoint - The article discusses the valuation methods for Bank of Queensland Limited (BOQ) shares, focusing on the price-earnings ratio (P/E) and the dividend discount model (DDM) as tools for assessing the bank's share price relative to its earnings and dividends [5][9]. Valuation Methods - The P/E ratio compares BOQ's share price to its earnings per share, with BOQ currently having a P/E ratio of 17.3x, which is below the banking sector average of 19x, suggesting potential undervaluation [8]. - A sector-adjusted P/E valuation for BOQ, based on its earnings per share, results in a valuation of $7.97 [8]. - The DDM approach forecasts future dividends, with the current dividend per share at $0.34, leading to a valuation of $7.19, which can increase to $7.40 with an adjusted dividend of $0.35 [13]. Dividend Valuation - Considering fully franked dividends, the valuation based on a gross dividend payment of $0.50 results in a share price valuation of $10.57 [14]. - Different growth and risk rate assumptions yield a range of valuations, with a 2% growth rate and a 6% risk rate resulting in a valuation of $8.75 [15]. Importance of Financial Analysis - Analysts are encouraged to look beyond simple valuation models and consider the growth of total loans on the balance sheet, as well as provisions for bad loans and sources of capital [17][18]. - Understanding the risks associated with capital acquisition, particularly in relation to overseas debt markets versus customer deposits, is crucial for a comprehensive financial analysis [18].