Is National Bank Of Canada (TSX:NA) Still Undervalued After A 165% Run?

National Bank of Canada has delivered a powerful share-price run over the past several years, which naturally raises a sharper question for you as an investor. Is the current price tag supported by the returns the bank earns on the capital it puts to work?

• Over the past 5 years the stock has gained 165.2%, which puts real weight on whether those gains are underpinned by the bank's ability to earn attractive returns on its capital base.

• The acquisition of Canadian Western Bank and the broader national footprint can influence how efficiently National Bank of Canada deploys capital, which may affect both its return on equity and the sustainability of those returns.

• If you'd rather focus on earnings, this one's for you. See why National Bank of Canada's 17.5x P/E tells a different valuation story .

The issue now is whether National Bank of Canada's current share price is justified by the returns it earns on its capital.

If you want to stress test this same question about the returns companies earn on their capital across a wider field, scan through 7 high quality undervalued stocks .

Is National Bank of Canada Still Cheap on Excess Returns?

The Excess Returns model looks at what National Bank of Canada earns on its equity above the return investors expect. For this bank, the inputs suggest a franchise that is generating returns on capital that sit comfortably above its estimated funding cost. Book value is CA$86.19 per share, while the stable book value estimate of CA$88.95 per share points to a balance sheet that analysts expect to keep compounding. The model uses a stable EPS estimate of CA$14.77 per share, based on forward Return on Equity assessments from 8 analysts, and an average ROE of 16.60% against an estimated equity cost of CA$6.37 per share.

That spread is captured in an excess return of CA$8.40 per share, which is what drives the Excess Returns valuation to sit meaningfully above the current share price of CA$214.49. Because the 2025 Canadian Western Bank acquisition has broadened National Bank of Canada's reach, the higher earnings power implied by analysts helps explain why the model views the equity as more valuable than what is implied by today's quote. You can see the full Excess Returns output and compare it to other methods in more detail at. Find out what National Bank of Canada could be worth using our Excess Returns estimate .

The National Bank of Canada Narrative: What Would Justify Today's Price?

Narratives pick up where the Excess Returns model leaves off for National Bank of Canada. They explain which paths for earnings, profitability and growth would need to hold for the current share price to look materially too low or too high, and they sit on Simply Wall St's Community page. Rather than relying on a single multiple or model, each narrative lays out the assumptions behind its view of fair value so you can compare those to future results as they arrive.