January certainly was a mixed month for shareholders of Westpac Banking Corp (ASX: WBC). After hitting a 52-week high of $34.08 at the start of the month, the shares of Australia's oldest bank have now fallen back 6% to $31.99.
After such a sharp pull back in its share price I'm sure many investors are wondering whether they have fallen to a level that makes them a buy.
Unfortunately, I think they'd need to drop a touch lower still, before I would class them as a buy.
As I mentioned recently, in the last 10 years Westpac's shares have traded at an average of 13x earnings, in line with its peers Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB).
At present its shares are changing hands at approximately 14.3x trailing earnings. Although this level is likely to fall towards its average earnings multiple if it delivers on the market's growth expectations in FY 2017, this still doesn't give investors much room for growth.
Because of this I would suggest investors wait for an opportunity to buy in at around 12x forward earnings, which roughly equates to a share price of $29.40.
As well as the potential share price gains, at that price its shares would provide investors with a massive fully franked 6.4% dividend if it holds its dividend firm at $1.88 per share this year.
Whether or not the Westpac share price falls to this level only time will tell. But for now I'd prefer to be patient and wait for an opportunity to buy its shares at a great price, rather than pay over the odds for them.