Bank Stock Intrinsic Value Calculator

Calculate the intrinsic value of a bank stock using either the Dividend Discount Model (DDM) for banks with regular dividends or the Residual Income Model (RIM) for banks with irregular dividend payments. Enter all monetary values in the stock's reporting currency (e.g., GHS for Ghanaian stocks). All values below are displayed in the stock's reporting currency.

How the Intrinsic Value is Calculated

This calculator uses one of two models based on your selection:

DDM: Discounts forecasted dividends per share using a discount rate derived from CAPM, adding a terminal value based on perpetual growth: Intrinsic Value = PV of Dividends + PV of Terminal Value.
RIM: Starts with current book value per share, adds the present value of forecasted residual income (EPS - Cost of Equity × Book Value), plus a terminal value: Intrinsic Value = Book Value + PV of Residual Income + PV of Terminal Value.

To estimate Earnings Per Share (EPS) and Dividends Per Share, you need historical data and future forecasts. Here’s how to get them for global and Ghanaian stocks:

Historical Data: Check the bank’s past EPS and dividends:
- Yahoo Finance: Search the stock ticker (e.g., JPM for JPMorgan Chase), go to “Financials” for EPS, and “Dividends” for dividends.
- Company Reports: Visit the bank’s investor relations website for annual/quarterly reports (e.g., 10-K, 10-Q for U.S. banks).
- Brokerage Platforms: Use apps like Fidelity or Robinhood for historical financials.
- For Ghanaian Stocks:
  - annualreportsghana.com: Access annual reports for GSE-listed companies like GCB Bank or Ecobank Ghana.
  - gse.com.gh: Find financial statements and company profiles under “Financial Statements” or “Listed Companies.”
  - afx.kwayisi.org/gse/: View historical share prices, earnings, and dividend payments for GSE stocks (e.g., Societe Generale Ghana).
Analyst Forecasts: Get EPS and dividend predictions for 1–2 years:
- Yahoo Finance: Check the “Analysis” tab for EPS estimates.
- Nasdaq.com: Search the ticker for “Earnings” forecasts.
- Seeking Alpha: Read articles for analyst dividend predictions.
- For Ghanaian Stocks: Analyst forecasts may be limited, but check afx.kwayisi.org/gse/ for earnings data or gse.com.gh for company announcements.
Estimate Future Years: For years 3–5, use historical growth:
- Example: If EPS was $16 in 2024 and grew 5% annually, estimate 2025: $16 × 1.05 = $16.80, 2026: $16.80 × 1.05 = $17.64.
- Dividends: If GHS 0.30 in 2024 with 4% growth, estimate 2025: GHS 0.30 × 1.04 = GHS 0.312.
- Consider economic trends (e.g., high interest rates boost bank profits; check Bank of Ghana reports for Ghana).
Tips:
- Use modest growth rates (3–5% for EPS, 2–5% for dividends) unless specific news suggests otherwise.
- Check earnings calls or news on gse.com.gh for growth plans (e.g., loan expansion for Ghanaian banks).

Examples:

JPMorgan Chase (JPM): 2024 EPS = $16.23, Dividend = $4.60. Forecast 3 years at 5% EPS growth, 4% dividend growth: EPS ($16.80, $17.64, $18.52), Dividends ($4.78, $4.97, $5.17).
GCB Bank (GSE:GCB): 2024 EPS = GHS 0.80, Dividend = GHS 0.30 (from annualreportsghana.com). Forecast 3 years at 5% growth: EPS (GHS 0.84, GHS 0.88, GHS 0.93), Dividends (GHS 0.312, GHS 0.324, GHS 0.337).

Valuation Model

Select Model:

Use DDM for banks with consistent dividends (e.g., GCB Bank); RIM for banks with irregular dividends (e.g., Societe Generale Ghana).

Forecast Period

Number of Forecast Years:

Select 3-5 years based on the reliability of your forecasts.

Cost of Equity (CAPM)

Discount rate (r) = Risk-Free Rate + Beta × (Market Return - Risk-Free Rate).

Risk-Free Rate (%)

Yield on 10-year government bonds (e.g., Ghana T-Bill ~24% from Bank of Ghana, U.S. Treasury ~4%).

Market Return (%)

Expected return of the market (e.g., GSE ~10–15%, S&P 500 ~8–10%).

Beta

Stock volatility relative to the market (e.g., from Yahoo Finance or afx.kwayisi.org/gse/, ~1.1 for GCB Bank).

Dividend Inputs (DDM)

Enter forecasted dividends per share for each year. Find historical dividends on Yahoo Finance (“Dividends” tab), annualreportsghana.com, gse.com.gh (“Financial Statements”), or afx.kwayisi.org/gse/. Estimate future dividends using historical growth (e.g., 2–5% per year) or analyst forecasts from Nasdaq.com or gse.com.gh.

Dividend Year 1

E.g., if dividend was GHS 0.30 in 2024, enter GHS 0.30 × 1.04 = GHS 0.312 with 4% growth.

Dividend Year 2

E.g., if year 1 dividend is GHS 0.312, enter GHS 0.312 × 1.04 = GHS 0.324 with 4% growth.

Dividend Year 3

E.g., if year 2 dividend is GHS 0.324, enter GHS 0.324 × 1.04 = GHS 0.337 with 4% growth.

Dividend Year 4

E.g., if year 3 dividend is GHS 0.337, enter GHS 0.337 × 1.04 = GHS 0.350 with 4% growth.

Dividend Year 5

E.g., if year 4 dividend is GHS 0.350, enter GHS 0.350 × 1.04 = GHS 0.364 with 4% growth.

Residual Income Inputs (RIM)

Current Book Value per Share

Total Equity ÷ Shares Outstanding from latest financials (e.g., Yahoo Finance “Balance Sheet,” annualreportsghana.com, or gse.com.gh).

Enter forecasted earnings per share (EPS) for each year. Find historical EPS on Yahoo Finance (“Financials” tab), annualreportsghana.com, gse.com.gh (“Financial Statements”), or afx.kwayisi.org/gse/. Estimate future EPS using historical growth (e.g., 3–5% per year) or analyst forecasts from Yahoo Finance “Analysis” tab or gse.com.gh.

EPS Year 1

E.g., if EPS was GHS 0.80 in 2024, enter GHS 0.80 × 1.05 = GHS 0.84 with 5% growth.

EPS Year 2

E.g., if year 1 EPS is GHS 0.84, enter GHS 0.84 × 1.05 = GHS 0.882 with 5% growth.

EPS Year 3

E.g., if year 2 EPS is GHS 0.882, enter GHS 0.882 × 1.05 = GHS 0.926 with 5% growth.

EPS Year 4

E.g., if year 3 EPS is GHS 0.926, enter GHS 0.926 × 1.05 = GHS 0.972 with 5% growth.

EPS Year 5

E.g., if year 4 EPS is GHS 0.972, enter GHS 0.972 × 1.05 = GHS 1.021 with 5% growth.

Terminal Growth Rate

Terminal Growth Rate (%)

Long-term growth rate, e.g., GDP growth of the stock's country (~8% for Ghana, 2–3% for U.S., check World Bank or Bank of Ghana).

Current Market Price (Optional)

Current Market Price per Share

Enter the stock's current price (e.g., from Yahoo Finance or afx.kwayisi.org/gse/ for GSE stocks).

Important Notice

If the results do not appear after clicking 'Calculate,' try selecting the other valuation method, use it, and then return to your preferred method. The results should then appear.

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