• For investors wondering whether Bank of Hawaii at around US$76.60 is offering fair value or a margin of safety right now, this article breaks down what that price actually implies.
• The stock is up 12.0% year to date and 19.7% over the past year, even though it has fallen 1.5% in the last week and 4.4% over the last month.
• Recent coverage has focused on Bank of Hawaii as investors reassess regional bank risks and capital positions. This helps frame the stock's move over shorter timeframes. Commentary has also highlighted how regional banks are being compared on balance sheet strength and profitability metrics, putting valuation front and center for Bank of Hawaii as well.
• Right now, Bank of Hawaii holds a value score of 2 out of 6. The next sections walk through what traditional valuation approaches say about that score, then finish with a more complete way to think about the stock's value.

Bank of Hawaii scores just 2/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Bank of Hawaii Excess Returns Analysis

The Excess Returns model looks at how efficiently Bank of Hawaii turns shareholder equity into earnings, then compares those returns with the cost of that equity. In simple terms, it asks whether the bank earns more on each dollar of equity than investors require as compensation for risk.

For Bank of Hawaii, the model uses a Book Value of US$38.10 per share and a Stable EPS of US$6.87 per share, based on weighted future Return on Equity estimates from 5 analysts. The Average Return on Equity is 15.81%, while the Cost of Equity is US$3.09 per share. That leaves an Excess Return of US$3.78 per share, which is what this model treats as value created above the required return.

The model also assumes a Stable Book Value of US$43.48 per share, sourced from weighted future Book Value estimates from 3 analysts. Putting these inputs together, the Excess Returns framework arrives at an estimated intrinsic value of about US$149.49 per share, which implies the stock is 48.8% undervalued versus the recent price around US$76.60.

Result: UNDERVALUED

Our Excess Returns analysis suggests Bank of Hawaii is undervalued by 48.8%. Track this in your watchlist or portfolio, or discover 46 more high quality undervalued stocks.

Approach 2: Bank of Hawaii Price vs Earnings

For a profitable company like Bank of Hawaii, the P/E ratio is a useful shorthand for how much you are paying for each dollar of earnings. It links the stock price directly to the earnings power of the business, which is central for banks.

What counts as a "normal" or "fair" P/E depends on how the market views a stock's growth prospects and risks. Higher expected growth or lower perceived risk can justify a higher multiple, while slower growth or higher risk usually lines up with a lower one.

Bank of Hawaii currently trades on a P/E of 15.31x. This sits above the Banks industry average P/E of 11.50x and the peer average of 10.56x, so on simple comparisons the stock carries a richer valuation. Simply Wall St's Fair Ratio for Bank of Hawaii is 13.79x, which is a tailored multiple that reflects factors like earnings growth, profit margins, risks, market cap and the company's industry. Because it adjusts for these company specific features, it can be more informative than a broad peer or industry comparison alone.

Comparing the Fair Ratio of 13.79x with the current 15.31x suggests the stock is pricing in more than this framework would imply.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Bank of Hawaii Narrative

Earlier we mentioned that there is an even better way to understand valuation. Narratives let you attach a clear story about Bank of Hawaii to the numbers by linking your view on its future revenue, earnings and margins to a financial forecast, a fair value and a simple Fair Value versus Price comparison that updates as news or earnings arrive. All of this is available within the Community page on Simply Wall St that is used by millions of investors. One investor might build a Narrative that focuses on the bank's strong local position, digital investment and fee income to support a higher fair value such as the consensus target of US$86.67. Another might focus on concentration in Hawaiian real estate, funding costs and execution risks to arrive at a lower fair value. Seeing both side by side can help you decide what the current price of around US$76.60 really means for your own next move.

Do you think there's more to the story for Bank of Hawaii? Head over to our Community to see what others are saying!

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.