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Is the Australia and New Zealand Banking Group share price worth $31?

The Australia and New Zealand Banking Group (ASX: ANZ) share price should be $31.

According to 16 analysts surveyed by The Wall Street Journal, eight have ‘buy’ recommendations on ANZ shares, with the average share ‘price target’ $31 and an ‘overweight’ rating.

That’s a pretty healthy premium to the current ANZ share price of $25.95. In fact, that’s a margin of 19% between the market price and targeted price.

By comparison, analysts think ANZ rival National Australia Bank Ltd. (ASX: NAB) is 18% undervalued and have ascribed it an ‘overweight’ rating; Commonwealth Bank of Australia (ASX: CBA) is 4.5% undervalued and a ‘hold’; and Westpac Banking Corp (ASX: WBC) shares are 9.6% undervalued and rated ‘overweight’.

Is ANZ worthy of closer inspection?

ANZ’s share price suffered heavy selloffs throughout this year – it’s down 19% since the beginning of the year – thanks to its exposure to Asian markets. While Asia is frequently touted as a very promising long-term growth prospect, investors and analysts have become concerned over China’s economic transition and its implications for ANZ. Extreme volatility in Asian financial markets earlier this year also raised more than a few eyebrows.

Recently, Mike Smith, who’ll resign as ANZ CEO this month, moved to quell investors’ fears by suggesting the group’s exposure to China was minimal (around 3%) and that any significant slowdown or impairment of credit quality could be managed. Nevertheless, ANZ’s goal of generating 25% to 30% from Asia the Pacific, Europe and Americas (APEA) markets by 2017 is still in play.

In the meantime, a slowdown in the Australia market has most bank shareholders concerned and could explain analysts’ undervalued ratings on bank shares. Maybe fears of a slowdown will prove unfounded, maybe they won’t. Time will tell.

Foolish takeaway

In my opinion, ANZ shares appear cheap for a reason. And although fears of a slowdown in its core markets could be overblown, it may pay to wait for a lower price before buying more shares.

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Motley Fool writer/analyst Owen Raszkiewicz has no position in any stocks mentioned.

Owen welcomes your feedback on Google plus (see below), LinkedIn or you can follow him on Twitter @ASXinvest.

Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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