Are BEN shares worth considering in January?

Core Viewpoint - Bendigo & Adelaide Bank Ltd's share price is currently under scrutiny as ASX investors attempt to establish a price target for the company [1] Group 1: Market Context - Australia's major banks constitute approximately 30% of the share market based on market capitalization [2] - The popularity of ASX bank shares has been notable since the early 1990s, particularly following a recession and high mortgage interest rates exceeding 15% [2] - Banks are generally considered to have implicit protection against total financial collapse, as their failure would pose significant political challenges [2] Group 2: Valuation Methods - The Price-to-Earnings (PE) ratio is a key metric for comparing a company's share price to its earnings per share [3] - Three methods to utilize the PE ratio include intuitive buying/selling thresholds, comparative analysis with peers or sector averages, and calculating a valuation based on expected earnings multiplied by an appropriate PE multiple [4] Group 3: Current Valuation of Bendigo & Adelaide Bank Ltd - The current share price of Bendigo & Adelaide Bank Ltd is $11.08, with earnings per share for FY24 reported at $0.87, resulting in a PE ratio of 12.7x, which is below the banking sector average of 19x [5] - A sector-adjusted PE valuation based on the average PE ratio yields a target price of $16.18 [5] Group 4: Dividend Valuation - A Dividend Discount Model (DDM) is a more comprehensive approach for valuing banks, utilizing recent or forecasted dividends and a risk rate [6][7] - The DDM formula indicates that with a blended growth and risk rate, the valuation of BEN shares is approximately $13.32, and with an adjusted dividend payment, it rises to $13.75 [10] - Considering fully franked dividends, the valuation based on a gross dividend payment of $0.93 suggests a share price of $19.64 [11] Group 5: Growth and Risk Analysis - Various growth rates (2% to 4%) and risk rates (6% to 11%) yield different valuations, with the highest valuation of $32.50 occurring at a 4% growth rate and a 6% risk rate [12] - The analysis emphasizes that these valuation strategies are just initial steps in evaluating bank shares like Bendigo & Adelaide Bank Ltd [12] Group 6: Additional Considerations - Important questions for further analysis include the sustainability of net interest margins and the management of regulatory challenges related to non-interest income [13] - The assessment of the management team's culture is also crucial, as it impacts long-term investment decisions [13]