Is It Too Late to Consider Commerzbank After Its 130% 2025 Share Price Surge?

• Wondering if Commerzbank's huge run up has already priced in the upside, or if there is still value on the table for new investors?
• The stock has climbed about 3.5% over the last week, 12.2% over the past month, and an eye catching 129.6% year to date, with a 140.2% gain over the last year and a massive 627.6% rise over five years.
• Those moves have been fueled by renewed confidence in European banks, as investors warm to higher for longer interest rate scenarios and the potential for stronger net interest margins. At the same time, ongoing balance sheet clean up and strategy execution have shifted sentiment, helping Commerzbank shake off some of its old restructuring stigma.
• Even after that rally, Commerzbank only scores a 2 out of 6 on our undervaluation checks, which suggests the market may be getting ahead of itself in some areas while still overlooking others. Next, we will break down what traditional valuation approaches say about the stock, and then circle back to a more nuanced way of thinking about its true worth that many investors miss.

Commerzbank scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Commerzbank Excess Returns Analysis

The Excess Returns model asks a straightforward question: does Commerzbank earn enough on its equity, after paying shareholders an appropriate return for the risk they take, to justify a higher valuation than its book value suggests?

Commerzbank currently has a Book Value of €20.61 per share and a Stable EPS of €3.15 per share, based on weighted future Return on Equity estimates from 11 analysts. With an Average Return on Equity of 10.60% and a Cost of Equity of €1.80 per share, the bank is expected to generate an Excess Return of €1.35 per share over and above its cost of capital.

Those excess profits are then projected on a growing capital base, with a Stable Book Value forecast of €29.72 per share, sourced from seven analysts. Discounting these excess returns results in an intrinsic value estimate of about €59.59 per share, implying Commerzbank is roughly 40.0% undervalued versus its current market price.

This model suggests the market is still underestimating how efficiently Commerzbank can compound shareholder capital over time.

Result: UNDERVALUED

Our Excess Returns analysis suggests Commerzbank is undervalued by 40.0%. Track this in your watchlist or portfolio, or discover 905 more undervalued stocks based on cash flows.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Commerzbank.

Approach 2: Commerzbank Price vs Earnings

For a profitable bank like Commerzbank, the price to earnings ratio is a useful yardstick because it directly links what investors pay today to the profits the business is already generating. In general, faster and more reliable earnings growth, with lower perceived risk, justifies a higher PE, while slower or bumpier growth usually calls for a discount.

Commerzbank currently trades on a PE of 16.22x, a clear premium to both the broader Banks industry average of about 10.90x and its peer group at roughly 10.52x. On the surface, that suggests the market is already baking in stronger prospects for Commerzbank than for the typical European bank.

Simply Wall St’s Fair Ratio offers a more tailored view by estimating what PE multiple Commerzbank should trade on, given its specific earnings growth outlook, profitability, risk profile, industry and market cap. That Fair Ratio comes out at 15.91x, only slightly below the current 16.22x. Because this gap is small, the stock looks reasonably priced rather than materially cheap or expensive on an earnings basis.

Result: ABOUT RIGHT

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1459 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your Commerzbank Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, a simple framework on Simply Wall St’s Community page that lets you attach a clear story to your numbers by linking your view of Commerzbank’s future revenues, earnings and margins to a financial forecast and then to a Fair Value that you can compare with today’s share price to help inform your decisions. This all updates dynamically as new news or earnings arrive. For example, one investor might build a bullish Commerzbank Narrative around accelerating digital transformation, stronger fee income and a Fair Value closer to the upper analyst target of about €36.10. Another might focus on regulatory risks, margin pressure and slower growth to arrive at a more cautious view nearer €21.00. Both are using the same easy tool to turn their perspective into a quantified, trackable investment thesis.

Do you think there's more to the story for Commerzbank? 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.

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