If you have been watching Bank of China’s stock, you are not alone. Whether you are considering buying in, holding, or wondering if it is time to lock in some profits, the last few years have given you plenty to think about. With share prices rising more than 23.8% in the past year and an outstanding 163.2% over the last five years, Bank of China has outperformed many expectations. Just this past week, shares nudged up another 2.6%, echoing a positive sentiment that has been building among investors.
Some of this optimism is tied to ongoing global financial shifts, where Chinese banks are seeing stronger capital inflows and a broad wave of strategic government support. Recent headlines highlight regulatory efforts aimed at reinforcing the stability of major banks, and Bank of China stands to benefit from both its size and its international footprint. These factors are changing how many investors perceive risk in the Chinese banking sector. They are also making those return numbers even more interesting.
With a value score of 5 out of a possible 6 checks for undervaluation, Bank of China already looks compelling compared to its peers. Next, let’s break down how that score came together using classic valuation approaches. As you will see, there may be an even more insightful way to look at the company’s worth.
Why Bank of China is lagging behind its peers
The Excess Returns valuation model measures how much return a company generates above the cost of its equity. This makes it a useful way to assess whether shareholders are getting a worthwhile reward for their investment risk. For Bank of China, this approach focuses on several key metrics drawn from forward-looking analyst expectations and historical performance.
Currently, Bank of China has a book value of HK$8.19 per share and a stable earnings per share (EPS) estimate of HK$0.75, based on a consensus of 14 analysts. The cost of equity is calculated at HK$0.78 per share, resulting in a modest excess return of HK$-0.02 per share. The company’s average return on equity is a solid 8.26%, with forecasts projecting a stable book value moving up to HK$9.11 per share, sourced from 11 analyst estimates.
Applying the Excess Returns model to these figures suggests an intrinsic value significantly higher than the current market price. The model estimates Bank of China’s stock to be approximately 53.8% undervalued. This result suggests the market may be underestimating the company’s capacity to generate returns on equity, especially relative to its peers and the industry average.
Result: UNDERVALUED
Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Bank of China.
3988 Discounted Cash Flow as at Oct 2025
Our Excess Returns analysis suggests Bank of China is undervalued by 53.8%. Track this in your watchlist or portfolio, or discover more undervalued stocks.
The price-to-earnings (PE) ratio is a favored valuation tool when assessing profitable companies like Bank of China, because it directly relates a company’s market price to its earnings power. A lower PE can signal that a stock is undervalued relative to its profitability, while a higher PE suggests higher market expectations for future growth or increased risk.
Growth outlooks and risk perception both play a role in what is considered a standard or “fair” PE. Companies with higher, more reliable growth tend to warrant higher PEs, while firms in riskier or slower-growing environments usually see lower multiples. Currently, Bank of China trades at a PE of 5.79x. This is below both the peer average of 6.66x and the banking industry average of 6.00x, indicating that the market prices the company more conservatively than many of its rivals.
Simply Wall St’s proprietary “Fair Ratio” refines the idea of appropriate valuation. The Fair Ratio for Bank of China stands at 6.71x, factoring in the company’s unique growth, risks, profit margins, and scale. This serves as a more holistic gauge than simple peer or industry comparison, as it accounts for detailed company-specific financials as well as broader sector dynamics.
Compared to its Fair Ratio, Bank of China’s current PE is just 0.92x lower. This places it very close to what would be considered fairly valued based on the company’s fundamentals and future prospects.
Result: ABOUT RIGHT
SEHK:3988 PE Ratio as at Oct 2025
PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover companies where insiders are betting big on explosive growth.
Earlier we mentioned that there is an even better way to understand valuation, so let’s introduce you to Narratives. A Narrative is simply your own story or viewpoint about a company, connecting your beliefs about its future growth, profitability, and risks to a clear financial forecast and a fair value estimate. Narratives link the numbers to real-world drivers by allowing you to explain why you think Bank of China’s value will move in a certain direction and compare that story to other investors’ perspectives.
Available right on Simply Wall St’s Community page and trusted by millions of investors, Narratives are quick and easy to use. You can write your case for why Bank of China’s digital innovation, international reach, or economic risks will impact its future, then instantly see how your fair value stacks up against the market price and other users’ forecasts. When new earnings or news are released, Narratives update automatically, keeping your story relevant and actionable. For example, some investors see Bank of China’s urbanization push and digital payments strategy unlocking long-term value, leading to price targets as high as HK$5.90. Others remain cautious about risks like low interest rates and assign a price as low as HK$2.79, highlighting how Narratives can clarify decisions about buying or selling at any time.
Do you think there’s more to the story for Bank of China? Create your own Narrative to let the Community know!
SEHK:3988 Community Fair Values as at Oct 2025
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include 3988.HK.
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