Despite the market sinking lower on Tuesday, the Bank of Queensland Limited (ASX: BOQ) share price continued its strong run and reached a 52-week high of $12.98.
This brought the regional bank's 12-month return to an impressive 22%.
Is it still in the buy zone?
While I am a fan of Bank of Queensland and acknowledge that its trailing fully franked 5.9% dividend is one of the more generous on the market, I'm not overly keen on its current valuation.
Although I wouldn't necessarily be in a rush to sell the regional bank's shares, I certainly wouldn't be buying its shares today.
At the current share price Bank of Queensland's shares are changing hands at approximately 15x annualised earnings. This is significantly higher than the average of 13x earnings that its shares have traded at over the last eight years.
Furthermore, at 1.4x book value its shares are much more expensive than rival regional bank Bendigo and Adelaide Bank Ltd (ASX: BEN) which trades at just 1x book value.
While its net interest margin is likely to expand due to interest-only repricing and less competition in term deposits, I'm not overly convinced the increase in earnings this generates will be enough to take its share price meaningfully higher.
In light of this, I would suggest investors hold off an investment in Bank of Queensland for the time being and wait for a better entry point.
In my opinion, $11.00 would be an ideal buy price. This would put its shares below its average of 13x earnings and provide investors with reasonable upside potential over the next 12 to 24 months.
