Is the Westpac share price expensive in April?

How expensive are Westpac shares compared to the other ASX 200 banks?

Sebastian Bowen

Author Bio Sebastian Bowen has been a Motley Fool contributor since late 2018. Sebastian found his passion for writing and educating others about shares and all things finance after completing his studies in political, economic and social science and enjoys bringing this passion to life at the Fool. His investment philosophy is a simple one – buying high-quality companies at prices that make sense. When he’s not researching his next investment at all hours of the morning, Sebastian enjoys classic movies and likes to unwind with a good book, newspaper or record. Areas of Expertise Dividend investing ETFs Education Bachelor of Political, Economic, and Social Sciences (Government and International Relations), University of Sydney Social Media X/Twitter Favorite Investment Quote "In the short run, the market is a voting machine, but in the long run, it is a weighing machine." – Benjamin Graham

Published April 27, 2022 5:03 pm AEST

Now that we are getting towards the business end of April, it might be a good chance to take stock and check out the Westpac Banking Corp (ASX: WBC) share price.

As a big four ASX 200 bank, Westpac is one of the largest and most widely-held ASX shares on the market.

So as it currently stands, Westpac shares closed on Wednesday trading at $23.45 each, down a nasty 1.88% for the day. This places the Westpac share price 8.26% higher so far in 2022, a significant outperformance of the S&P/ASX 200 Index (ASX: XJO).

But over the past 12 months, Westpac's performance hasn't been quite as impressive. Since April 2021, Westpac shares have lost 7.31% of their value. The bank is still well in the red over the past five years, too, having gone backwards by a significant 33% or so over this period.

So that might lead some investors to wonder if the Westpac share price is cheap or expensive right now.

A man clasps his hands together while he looks upwards and sideways pondering how the Betashares Nasdaq 100 ETF performed in the 2022 financial year — Image source: Getty Images

Are Westpac shares cheap compared to the other ASX 200 banks?

Well, let's see how this ASX 200 bank is being priced compared to its peers. The price-to-earnings (P/E) ratio is a useful metric to employ when comparing the valuations of mature companies in the same sector.

Right now, Westpac shares have a P/E ratio of 17.57, meaning that investors are willing to pay $17.57 for every $1 of earnings the bank brings in. This tells us that, on a raw dollar-to-dollar earnings comparison, investors are valuing Westpac shares at a higher price than Australia and New Zealand Banking Group Ltd (ASX: ANZ). ANZ shares currently trade with a P/E ratio of 13.53.

However, investors are giving Westpac shares an almost identical premium to fellow bank National Australia Bank Ltd (ASX: NAB). NAB currently has a P/E ratio of 17.61, just a tad higher than Westpac's own.

But Westpac can't shine a light on Commonwealth Bank of Australia (ASX: CBA) shares. CBA commands a clear premium for ASX bank investors. In CBA's case, investors are willing to pay $19.80 for every $1 of CBA's earnings.

So right now, Westpac shares are cheaper than CBA and NAB on a P/E ratio basis but more expensive than ANZ.

Automatic Renewal

By taking up this offer, you will also be enrolled in our auto-renewal program, which is our way of making your ongoing subscription easier by ensuring uninterrupted service. Don't worry, though – you're not locked in, and can cancel your auto-renewal at any time before each 'anniversary' date without question or penalty.