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If you are wondering whether Industrial and Commercial Bank of China is attractively priced right now, you are not alone. The stock often draws attention from investors looking for clear value signals.
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The share price last closed at HK$6.15, with a 3.1% decline over the past week, a 0.3% gain over the last 30 days, a 3.0% decline year to date, and returns of 23.6% over 1 year, 82.1% over 3 years, and 82.4% over 5 years.
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Recent coverage has focused on Industrial and Commercial Bank of China as one of the major Hong Kong listed banks. Investors are paying close attention to how large lenders are being priced relative to their book values and earnings multiples. This has helped put valuation front and center for the stock, as investors weigh longer term return profiles against shorter term price moves.
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On Simply Wall St's valuation checks, Industrial and Commercial Bank of China scores 5 out of 6 for potential undervaluation, giving it a value score of 5. Next we will walk through the main valuation approaches used to reach that figure, before finishing with a different way to think about what the current price might really be telling you.
Approach 1: Industrial and Commercial Bank of China Excess Returns Analysis
The Excess Returns model asks a simple question: Is Industrial and Commercial Bank of China expected to earn more on its equity than it costs to fund that equity, and for how long can that gap last?
Here, the bank's book value is HK$10.73 per share, with a stable book value estimate of HK$12.12 per share, based on weighted future book value estimates from 9 analysts. Stable EPS is HK$1.05 per share, drawn from weighted future return on equity estimates from 12 analysts. The average return on equity is 8.67%, while the cost of equity is HK$1.01 per share, leaving an excess return of HK$0.04 per share.
Those excess returns are capitalised in the model to arrive at an intrinsic value of HK$14.33 per share. Compared with the recent share price of HK$6.15, this implies an intrinsic discount of 57.1%, which suggests the shares are priced well below the value indicated by this model.
Result: UNDERVALUED
Our Excess Returns analysis suggests Industrial and Commercial Bank of China is undervalued by 57.1%. Track this in your watchlist or portfolio , or discover 873 more undervalued stocks based on cash flows .
Approach 2: Industrial and Commercial Bank of China Price vs Earnings
For a profitable bank like Industrial and Commercial Bank of China, the P/E ratio is a useful quick check on how much you are paying for each unit of earnings. It ties the share price directly to the profits that belong to shareholders, which is especially relevant for mature, established lenders.
In general, higher growth expectations and lower perceived risk can support a higher P/E ratio, while slower expected growth or higher risk usually point to a lower, more conservative multiple being seen as normal. Industrial and Commercial Bank of China trades on a P/E of 5.56x. That sits slightly below both the Banks industry average of 5.77x and the peer average of 5.99x, which suggests the market currently prices its earnings at a modest discount to these simple benchmarks.
Simply Wall St's Fair Ratio for the stock is 7.10x. This is a proprietary estimate of what a more tailored P/E might look like, given factors such as earnings growth, profit margins, industry, market cap and company specific risks. Because it adjusts for these elements, it can be more informative than a straight comparison with peers or the industry. Set against the current 5.56x P/E, the Fair Ratio indicates the shares are trading below that tailored estimate.
Result: UNDERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1429 companies where insiders are betting big on explosive growth .
Upgrade Your Decision Making: Choose your Industrial and Commercial Bank of China Narrative
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which simply means putting your own story about a company alongside the numbers such as fair value, and your expectations for future revenue, earnings and margins.
A Narrative links what you believe about Industrial and Commercial Bank of China, like its role among major Hong Kong listed banks, to a forecast and then to a fair value that you can compare with the current HK$6.15 share price.
On Simply Wall St, within the Community page used by millions of investors, Narratives are an easy tool that helps you see whether your fair value suggests the stock is expensive or inexpensive, and they update automatically when new information such as earnings or news is added.
For example, one investor might create an Industrial and Commercial Bank of China Narrative that points to a relatively high fair value, while another might set a much lower fair value, and comparing those views with the same market price can help you think about when you might want to buy or sell.
Do you think there's more to the story for Industrial and Commercial Bank of China? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include 1398.HK .
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