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Bank of Ireland's current valuation analysed:
- How high can the current share price go?
Recent weeks have again seen a very strong increase in the Bank of Ireland share price. Ahead of the Results announcement on Monday morning next (March 3rd 2014), the shares closed at 38.9c on Friday evening up 8.66% for the day.
Amid much speculation regarding the reason for the share price increase, many commentators feel that Monday will bring yet more positive news from Chief Executive Richie Boucher.
Today (28/02/2014), Bank of Ireland has a Market Capitalisation of €12.5 billion. This however is still some way off the 2007 €18.5 billion valuation of the bank (68.4%). One would however be forgiven for questioning how accurate that 2007 valuation was, given what we now know about the state of the Irish economy at the time?
Currently there are 33 times more shares on issue than there was at the peak of the Bank of Ireland's valuation in February 2007 (2014 32 billion shares v 2007 979 million shares). There is however, much anticipation and speculation around how high Bank of Ireland shares can go. With that in mind, we set about analysing how the current Bank of Ireland share price compares to the pre economic crash valuation. Figure 1 below, illustrates the calculations in more detail.
Figure 1: Market Capitalisation and share price calculations
In summary, the current Market Capitalisation of the bank is 68.40% of its peak value. To equal the 2007 Market Capitalisation of €18.5 billion, Bank of Ireland shares would need to trade at €0.57 per share.
Although it may be hard to envisage or even justify such a valuation, it is impossible to legislate for sentiment in financial markets. We will watch this space with some interest in the coming weeks and months!