National Australia Bank Ltd (ASX: NAB) shares are trading around $36.70 at the time of writing, which puts them close to their 52-week low of $36.03.
That is a long way from their 52-week high of $49.45.
For investors looking at the major banks, that creates an interesting question. Is NAB now a buying opportunity after dropping 25% from its high, or is the market right to be cautious?
I think the answer depends on what an investor wants from the banking sector.
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The valuation looks more reasonable
The first thing that stands out is valuation.
According to CommSec, consensus estimates are for NAB to generate earnings per share of $2.43 in FY26 and $2.62 in FY27.
Based on the current share price, that puts the bank on around 15 times FY26 earnings and 14 times FY27 earnings.
That is not bargain-basement territory, but it does look far more reasonable than some other parts of the banking sector.
For comparison, Commonwealth Bank of Australia (ASX: CBA) is trading around $162.10. CommSec estimates point to earnings per share of $6.54 in FY26 and $7.04 in FY27.
That puts CBA on around 25 times FY26 earnings and 23 times FY27 earnings.
CBA deserves a premium in my view. It is the highest-quality major bank, with a stronger retail franchise, excellent digital capabilities, deep customer relationships, and a long record of market confidence.
But NAB is much cheaper on forecast earnings. For investors who want exposure to the major banks without paying CBA's premium multiple, I think NAB shares are worth considering.
The income looks attractive
The second reason NAB interests me is income.
CommSec's consensus estimates are for dividends per share of $1.72 in FY26 and $1.78 in FY27.
Based on the current share price, that implies forward dividend yields of around 4.7% and 4.9%, respectively.
Those are attractive yields, especially if the dividends are fully franked.
The key point is that investors are not relying only on capital growth. If NAB can deliver on those dividend forecasts, shareholders could receive a useful income stream while waiting for sentiment to improve.
Bank dividends are never guaranteed. Earnings, bad debts, margins, capital requirements, and the economic cycle can all affect payouts. But at today's share price, I think the forecast yield adds to the investment case.
Would I invest $5,000?
Yes, I would buy NAB shares at current prices.
The share price is near its 52-week low, the valuation appears reasonable, and the dividend yield appears attractive relative to consensus expectations.
I do not think NAB is my preferred exposure in the banking sector. That remains CBA because I think it is the better business.
But price is important too.
At the right valuation, a lower-preference stock can still be a good investment. NAB gives investors exposure to a large Australian bank with a strong business lending position, a major household banking operation, and the potential to recover if the market becomes less cautious.
I would not expect a straight-line rebound. The banks still face pressure from competition, funding costs, margins, credit quality, and a slower economy. But I think a lot of caution is already reflected in NAB's share price.
