NAB share price at $48: here’s how I would value them

Core Viewpoint - The article discusses the valuation of National Australia Bank Ltd (NAB) shares, highlighting the importance of understanding their worth for investors, particularly those interested in dividend income. Group 1: Valuation Methods - The Price-Earnings (PE) ratio is a common tool for valuing shares, comparing a company's share price to its earnings per share, with NAB's current PE ratio at 21.4x compared to the banking sector average of 21x [4][6] - A sector-adjusted PE valuation for NAB, based on its earnings per share and the sector average PE, results in a valuation of $46.82 [6] - The Dividend Discount Model (DDM) is highlighted as a more effective valuation method for banks, relying on past or forecasted dividends and assuming consistent growth [7][8] Group 2: Dividend Valuation - Using a DDM approach, NAB's last year's dividend of $1.69, with growth assumptions, yields a share valuation of $35.74, while an adjusted dividend of $1.71 increases the valuation to $36.16 [11] - Considering fully franked dividends, the valuation based on a gross dividend payment of $2.44 results in a share price valuation of $51.66 [12] Group 3: Growth and Risk Factors - The article emphasizes the importance of varying growth and risk rates in valuation, providing a range of potential valuations based on different assumptions [13] - Investors are encouraged to consider NAB's growth strategy, including its focus on interest income versus non-interest income, as well as economic indicators like unemployment and consumer sentiment [14]