Westpac Banking (WBK:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Westpac Banking(WBK:NYS)

Financial Services:Banks-Global

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
27.50 (AUD) / $19.92 (USD) 08/11/2018

Weighted Valuation
29.05 (AUD) / $21.04 (USD)

Use a conversion rate of 0.7243228 from AUD to USD.

Overall Rating
Undervalued by 5.6%

Valuation Models Analyst Consensus: 31.25 (AUD) / $22.64 (USD)
(in order of importance) Discounted Cash Flow: 28.59 (AUD) / $20.71 (USD)
Comparables: 23.34 (AUD) / $16.91 (USD)
Valuation Methods This company is:
Cash Flow: Fairly valued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Undervalued on an Asset Valuation

Company Overview (WBK:NYS USD)

Price 0.00
Range 0.00 – 0.00
52 week 0.00 – 0.00
Open 0.00
Vol / Avg. 0/0
Mkt cap 0
P/E 0.00
Div/yield 0.00/0.00
EPS 0.00
Shares 0
Beta 0.00

Company Description

Westpac is Australia’s oldest bank and financial services group, with a significant franchise in Australia and New Zealand in the consumer, small business, corporate, and institutional sectors, in addition to its major presence in wealth management. Westpac is among a handful of banks around the globe currently retaining very high credit ratings, and ranks third in assets across the four major Australian banks. The bank benefits from a large national branch network and significant market share, particularly in home loans and retail deposits.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for WBK:NYS

Using a discounted cash flow model we generated an intrinsic value of 28.59 (AUD) / $20.71 (USD) for WBK:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

WBK:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $28.59 1% 5% 1% 5%
WACC (or Ke) 11.05 $32.65 $25.43
Terminal Growth Rate 3.00 $25.87 $32.08
Tax Rate 0.31 $30.70 $26.48
Cash Flow 12,940,833,476 $27.10 $30.07
Capital Expenditures -411,600,000 $28.55 $28.63
Long Term Debt 0 $28.59 $28.59

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of 23.34 (AUD) / $16.91 (USD) for WBK:NYS. We also generated a valuation of 16.24 (AUD) / $11.76 (USD) using other metrics and comparables.
The comparable companies were Bank of Montreal (BMO:TSE), Canadian Imperial Bank (CM:TSE), Sumitomo Mitsui Financial (SMFG:NYS) and UBS Group (UBS:NYS).

Company WBK:NYS End Date Value
Earnings/Share 2.30 (AUD) / $1.67 (USD)
Book Value/Share 17.90 (AUD) / $12.96 (USD)
Sales/Share 5.94 (AUD) / $4.30 (USD)
Cash Flow/Share 3.03 (AUD) / $2.20 (USD)
EBITDA/Share 7.88 (AUD) / $5.71 (USD)
Price Based on Comps Adjustment Factor (%)
36.35 (AUD) / $26.33 (USD) -55.9
21.31 (AUD) / $15.43 (USD) 35.0
13.66 (AUD) / $9.90 (USD) 94.8
-60.87 (AUD) / ($44.09) (USD) 97.7
0.00 (AUD) / $0.00 (USD) 0.0
11.28 PE Ratio 15.80 13.30 9.95 8.18 31.76
1.46 PB Ratio 1.19 1.55 1.57 0.58 1.05
4.40 PS Ratio 2.30 2.82 2.87 1.69 1.82
8.61 PCF Ratio 3.66 6.59 3.85 0.55 0.00
0.00 EV to EBITDA 0.00 0.00 0.00 0.00 0.00


Using a multiples approach we generated a valuation of  61.01 (AUD) / $44.19 (USD) for WBK:NYS

Company WBK:NYS End Date Value
Earnings/Share 2.30 (AUD) / $1.67 (USD)
Book Value/Share 17.90 (AUD) / $12.96 (USD)
Sales/Share 5.94 (AUD) / $4.30 (USD)
Cash Flow/Share 3.03 (AUD) / $2.20 (USD)
EBITDA/Share 7.88 (AUD) / $5.71 (USD)
Price Based on Comps Adjustment Factor
31.27 (AUD) / $22.65 (USD) 0
32.83 (AUD) / $23.78 (USD) 0
30.30 (AUD) / $21.95 (USD) 0
48.68 (AUD) / $35.26 (USD) 0
161.98 (AUD) / $117.32 (USD) 0
Ratios Ratio Average
PE Ratio 13.59
PB Ratio 1.83
PS Ratio 5.10
PCF Ratio 16.04
EV to EBITDA 20.55

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  WBK:NYS for the last 10 years was  1.83

We ran the Adjusted Book Value for  WBK:NYS and generated a book value of  18.82 (AUD) / $13.63 (USD)
By multiplying these we get an adjusted valuation of  34.44 (AUD) / $24.95 (USD)

Analyst Data

In the Stockcalc database there are 2 analysts that provide a valuation for WBK:NYS. The 2 analysts have a concensus valuation for WBK:NYS for 2019 of 31.25 (AUD) / $22.64 (USD).

WBK:NYS Westpac Banking

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
2 2 0 4.0000 Outperform 2018-11-7

Current Price: 19.92 USD

Analyst Consensus
AUD Millions 2019 2020 2021
Mean EPS 2.40 2.47 2.40
# EPS Analysts 6 5 1
Mean Revenue 22,597.90 23,405.80 23,676.50
# Revenue Analysts 5 4 1
Mean Target Price 31.25
Mean Cash Flow 3.55 3.67 3.70
Mean Net Income 8,403.00 8,726.10 8,845.70
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate 2.00
Mean Capital Expenditure

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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