If you have National Australia Bank shares sitting in your portfolio, or you’re thinking of making a move, you’re not alone in wondering what’s next. The stock’s journey has been anything but dull, with its price up a striking 188.7% over five years, a hefty 67.1% gain in the last three, and a strong 22.8% lift across the past twelve months alone. This year to date, National Australia Bank has jumped 17.5%, despite a recent short-term dip of 1.5% in the last week. That kind of performance has certainly turned heads, especially amid shifting investor sentiment around the broader financial sector.

While long-term investors have enjoyed those robust returns, newer buyers face a big question: after such a run, is the stock undervalued, overvalued, or right where it should be? Plenty of the recent price moves are tied to market-wide trends like rising confidence in Australia’s banking system and changing expectations about interest rates. Both of these factors have a real impact on how much people are willing to pay for bank stocks.

When it comes to valuation, National Australia Bank currently scores a 0 out of 6 on the common undervaluation checks. That’s something we’ll unpack in detail, using some of the most popular valuation methods investors rely on. Stick with me, because before the end of this article, we’ll look beyond those usual approaches and explore what might give you an even sharper picture of what National Australia Bank’s shares are really worth.

National Australia Bank scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: National Australia Bank Excess Returns Analysis

The Excess Returns Model takes a close look at how much profit National Australia Bank can generate above its cost of equity, factoring in both the efficiency of reinvesting profits and long-term growth expectations. This approach centers on what shareholders actually take home after accounting for what it costs the company to raise and use capital. This makes it especially relevant for banks.

For National Australia Bank, the current Book Value stands at A$20.35 per share, with a stable expected EPS of A$2.49 per share, based on forward-looking estimates from 12 analysts. The cost of equity is calculated at A$1.70 per share, leaving an excess return of A$0.79 per share annually. The bank’s average return on equity is 11.38%, which is quite robust for the sector. Analysts also forecast the stable book value to reach A$21.86 per share in the longer term, drawing from data provided by nine different prognoses.

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After running these numbers through the model, the estimated intrinsic value comes out to A$38.72 per share. With the stock currently trading about 13.0% above this valuation, National Australia Bank appears to be overvalued by this measure.

Result: OVERVALUED

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for National Australia Bank.NAB Discounted Cash Flow as at Oct 2025

Our Excess Returns analysis suggests National Australia Bank may be overvalued by 13.0%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: National Australia Bank Price vs Earnings

The Price-to-Earnings (PE) ratio is often the go-to valuation metric for profitable companies like National Australia Bank because it connects a company’s share price to its actual earnings power. It shows how much investors are willing to pay today for a dollar of current profit, which makes it an intuitive and practical way to assess established, steadily earning businesses.

What counts as a fair PE ratio is shaped by how fast a company is expected to grow and the level of risk involved. Higher growth prospects or lower risk generally justify a higher PE. Industries facing uncertainty or slower growth tend to trade at lower ratios.

Currently, National Australia Bank trades at a PE of 19.1x, a bit higher than the Banks industry average of 10.4x and just above its peer average of 17.8x. However, Simply Wall St’s proprietary “Fair Ratio” model suggests a PE of 19.0x would be justified for NAB, after considering factors like its earnings growth, profit margin, sector, market cap and risk profile. While it is common to compare multiples with peers or the broader industry, the Fair Ratio is a more tailored benchmark since it accounts for all the unique business qualities affecting sustainable value.

With NAB’s current PE of 19.1x essentially matching its Fair Ratio of 19.0x, the market appears to be pricing the stock reasonably given what we know today.

Result: ABOUT RIGHTASX:NAB PE Ratio as at Oct 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your National Australia Bank Narrative

Earlier we mentioned there is a smarter way to understand valuation, so let us introduce you to Narratives. A Narrative is your personal story about a company, combining your beliefs about its future with key forecasts like revenue, earnings, and margins to arrive at your own fair value. Narratives connect the qualitative “why” with the quantitative “how much,” letting you turn your research and perspective into a well-supported investment case that you can easily track over time.

On Simply Wall St’s Community page, Narratives make it easy for anyone, whether new to investing or experienced, to build and share their views, see how their assumptions stack up against others, and instantly compare their calculated Fair Value to the company’s current price. What makes Narratives powerful is that they update dynamically as new news or financial results emerge, so your investment thesis can evolve as the facts change.

For example, some investors see National Australia Bank’s investments in digital banking and urban expansion as the drivers for a higher fair value, targeting A$39.14 per share, while more conservative outlooks focused on rising costs and regulatory risks take a lower view at just A$28.01. Narratives give you the tools and transparency to decide for yourself when NAB is a buy, hold, or sell, backed by both the numbers and your unique story.

Do you think there's more to the story for National Australia Bank? Create your own Narrative to let the Community know!ASX:NAB Community Fair Values as at Oct 2025

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 NAB.AX.

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