CIBC (TSX:CM) Stock Looks Cheap On Fair Value But Richer On Earnings
Canadian Imperial Bank of Commerce stock has delivered a very large 3 year return while the latest valuation checks still point to the shares trading at a discount to intrinsic value. With both the Excess Returns estimate and earnings multiples suggesting the stock may be undervalued, investors are weighing whether the recent gains have already recognised most of that upside.
- Canadian Imperial Bank of Commerce has returned about 238.4% over the past 3 years, which puts extra focus on whether the current price still leaves room against estimated value.
- Recent earnings strength across core banking and wealth management can support expectations for sustainable cash generation, while exposure to broader economic and credit conditions may still affect how much of that value investors are willing to pay for.
- The company screens as undervalued on several methods and scores 4 out of 6 on the broader valuation checks, which is a mixed picture rather than a clear bargain or clear overvaluation.
The issue now is whether Canadian Imperial Bank of Commerce's current valuation still offers a sufficient margin between the share price and its intrinsic value estimate.
Is Canadian Imperial Bank of Commerce Still Cheap on Excess Returns?
The Excess Returns valuation for Canadian Imperial Bank of Commerce looks at how much profit the bank earns over and above the return that shareholders require. For CIBC, the model uses a Book Value of CA$69.94 per share and a Stable EPS estimate of CA$11.34 per share, based on weighted analyst expectations for future return on equity. With an Average Return on Equity of 16.25% compared with a Cost of Equity of CA$5.02 per share, the bank generates an Excess Return of CA$6.32 per share on a Stable Book Value of CA$69.78 per share.
Using these inputs in the Excess Returns framework produces an estimated intrinsic value of CA$223.20 per share. Relative to the current share price, this calculation indicates the stock is about 28.4% undervalued. Because the recent rise in CIBC shares has been linked to strong earnings and growth in wealth management, the model suggests the market price has not fully reflected the bank’s expected profitability on its equity base.
Overall, the Excess Returns model indicates Canadian Imperial Bank of Commerce stock currently screens as undervalued.
Our Excess Returns analysis suggests Canadian Imperial Bank of Commerce is undervalued by 28.4%. Track this in your watchlist or portfolio, or discover 13 more high quality undervalued stocks.
Is Canadian Imperial Bank of Commerce Still Cheap on Earnings?
P/E is a useful way to look at Canadian Imperial Bank of Commerce because earnings are a key driver of value for established banks. On this measure, the stock currently trades on a P/E of 15.5x. That is higher than the broader Banks industry average of about 11.5x, which suggests investors are willing to pay more per dollar of earnings than for the sector overall.
However, a fair P/E ratio that incorporates Canadian Imperial Bank of Commerce's own profile is estimated at 17.8x, and the peer group average is 17.9x. Both sit above the current 15.5x level. This indicates the shares are trading at a discount relative to these reference points.
On the P/E multiple, Canadian Imperial Bank of Commerce stock appears inexpensive compared with both peers and its own fair ratio.
See what the numbers say about this price — find out in our valuation breakdown.
The Canadian Imperial Bank of Commerce Narrative: What Would Justify Today's Price?
Simply Wall St Narratives for Canadian Imperial Bank of Commerce pick up where the valuation puzzle leaves off and explain what growth, margins and earnings path would need to hold for the stock to be worth materially more or less than today's price. Each narrative links Canadian Imperial Bank of Commerce's possible catalysts and risks to a specific fair value estimate so you can track over time which broad storyline seems closest to reality.
Share a Narrative on Canadian Imperial Bank of Commerce to put your number driven view on its earnings strength, wealth management growth and recurring banking revenue to the test as new results and economic data arrive. Add your voice to the Simply Wall St community and track how your thesis holds up as Canadian Imperial Bank of Commerce's story develops.
Do you think there's more to the story for Canadian Imperial Bank of Commerce? Head over to our Community to see what others are saying!
The Bottom Line
The intrinsic value estimate for Canadian Imperial Bank of Commerce based on the Excess Returns model points to the stock trading at a meaningful discount, and the earnings multiple view also leans toward undervalued. The broader valuation checks are mixed rather than emphatic, so the gap between price and estimated value is not free of debate. What matters most from here is whether Canadian Imperial Bank of Commerce can sustain the profitability that underpins those excess returns without credit or macro risks eroding investor confidence in that earnings base.
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.
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