Are WBC shares worth considering in October?

Core Viewpoint - Westpac Banking Corp's share price is under scrutiny as ASX investors attempt to establish a target valuation for the company [1][2] Valuation Methods - The PE ratio is a common method for valuing bank shares, comparing a company's share price to its earnings per share [3] - Three approaches to using the PE ratio include intuitive buying/selling thresholds, comparing with sector averages, and calculating a sector-adjusted PE valuation [4] - Westpac's current share price is $39.1, with an earnings per share of $1.92, resulting in a PE ratio of 20.4x, slightly above the banking sector average of 20x [5] Dividend Discount Model (DDM) - DDM is a traditional valuation model that uses dividends to estimate a company's value, factoring in a risk rate [6][7] - The formula for DDM is Share price = full-year dividend / (risk rate – dividend growth rate), and it is advisable to calculate with various growth and risk assumptions [8] - Using a blended growth and risk rate, the valuation of WBC shares is estimated at $35.10, while an adjusted dividend payment leads to a valuation of $34.05 [10] Fully Franked Dividends - Fully franked dividends allow for an additional valuation adjustment based on gross dividend payments, resulting in a valuation of $48.64 when using a forecast gross dividend payment of $2.30 [11] Growth and Risk Rate Analysis - Different growth and risk rate scenarios yield a range of valuations for WBC shares, with a 2% growth rate and a 6% risk rate resulting in a valuation of $40.25, while a 4% growth rate and a 10% risk rate yield $20.13 [12] Additional Considerations - When analyzing bank shares like Westpac, it is essential to consider net interest margins, regulatory challenges, and the management team's effectiveness [13]