CIBC (TSX:CM) Stock Still Looks Undervalued Despite Its 275% Run

Canadian Imperial Bank of Commerce has seen its share price post very strong gains in recent years, which puts fresh focus on what investors are really paying for. The question now is whether the returns the bank earns on its capital are enough to support where the stock trades today.

• Over the past 3 years the share price has climbed 274.9%, which puts a lot of weight on whether CIBC's capital returns can keep justifying this kind of move.
• CIBC's traditional banking model, with its focus on lending and fee income, means returns on capital can hinge on how effectively management deploys deposits into loans and other interest earning assets.
• What if you looked at Canadian Imperial Bank of Commerce through its earnings instead? See what Canadian Imperial Bank of Commerce's 15.0x P/E says about the price.

For investors, the debate is whether the returns Canadian Imperial Bank of Commerce earns on its capital are strong and durable enough to make the current share price look sensible.

If you want to cross check Canadian Imperial Bank of Commerce against other ideas that also put capital efficiency under the microscope, a focused stock screen built around 2 high quality undervalued stocks is a useful next step.

Is Canadian Imperial Bank of Commerce Still Cheap on Excess Returns?

The Excess Returns model looks at how effectively Canadian Imperial Bank of Commerce turns its equity base into profits above its own cost of capital. For CIBC, the model uses a Book Value of CA$72.14 per share and a Stable EPS estimate of CA$11.73 per share, based on weighted forward Return on Equity inputs from 12 analysts. That earnings power compares with a Cost of Equity of CA$5.08 per share and an Excess Return of CA$6.65 per share, supported by an Average Return on Equity of 16.76%.

The framework also assumes a Stable Book Value of CA$69.96 per share, grounded in estimates from 8 analysts, then capitalises those excess profits to reach an intrinsic worth that the model indicates is substantially above the current CA$159.59 share price. Alongside this, a dividend based valuation cross check, using an annual dividend of CA$4.76 per share and a capped growth rate of 3.08%, points to a similar conclusion about the stock being priced below what its return on capital profile and payout stream would support over time. Find out what Canadian Imperial Bank of Commerce could be worth using our Excess Returns estimate.

The Canadian Imperial Bank of Commerce Narrative: What Would Justify Today's Price?

Narratives for Canadian Imperial Bank of Commerce pick up where the valuation puzzle leaves off and explain which paths for growth, profitability and earnings would need to hold for the stock to be worth materially more or less than today’s market price on Simply Wall St’s Community page. Each one treats Canadian Imperial Bank of Commerce's estimated worth as a thesis about the business that can be tracked over time rather than a one off snapshot.

One of the top community narratives on Canadian Imperial Bank of Commerce: 6% undervalued

"Scaling of Canadian Imperial Bank of Commerce AI tools such as AdvisorAssist, which has already delivered 3 million hours of productivity savings…"

Discover why this Narrative puts Canadian Imperial Bank of Commerce at 6% undervalued.

The Canadian Imperial Bank of Commerce share price is only one piece of the decision

Before you stop at the valuation work, it is worth asking who actually pulls the levers at Canadian Imperial Bank of Commerce and how their pay packets line up with your interests. See who runs Canadian Imperial Bank of Commerce and how they are paid.

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