The Globe and Mail reports in its Wednesday edition that CIBC analyst
Rob Sedran says bank shares are not as pricey as they look. The Globe's Tim Kiladze writes in the Streetwise column that Mr. Sedran compared current
bank valuations with historical trends, as
well as with other sectors.
The Big Six banks
trade at an average of 12.2 times
Canadian Imperial Bank of Commerce's fiscal 2014 earnings expectations.
If you compare the Canadian
bank shares' runs to that of
the S&P/TSX composite index as
well as the S&P 500 U.S. Regional
Bank index, as Mr. Sedran did,
the soaring values do not look so
dramatic. Both of those indexes
are also on fire.
Still, Mr. Sedran says, "Over the last year, EPS growth
has been better than forecast, but
the stocks have outpaced that
growth again, delivering a 27 per
cent average simple return." However, based on history, "it would
appear that while the Canadian
banks have seen a runup in share
prices and valuations, these levels
are far from out of the ordinary.
We think investors should
focus on operating conditions,
which remain benign to favourable,
and less on absolute valuations
(though even those are not
that problematic at this point)."
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