Is It Too Late To Consider TD Bank After Its 64% Surge In 2025?
- If you are wondering whether Toronto-Dominion Bank is still a smart buy after its huge run up, or if you are late to the party, this breakdown will help you assess whether the current price makes sense or whether the market is getting ahead of itself.
- TD’s share price has climbed to about CA$125.78, with a 64.4% year-to-date gain and a 77.6% return over the last year, even after a modest 0.5% dip in the past week and a 9.4% rise over the last month.
- These moves are happening as investors react to a mix of macro headlines, including shifting expectations for Bank of Canada rate cuts and renewed interest in financials tied to a stabilizing economic outlook. At the same time, news around North American banks tightening capital standards, cleaning up risk exposures, and refocusing on core lending and wealth management has helped reset sentiment toward large, diversified institutions like TD.
- Despite that surge, TD currently scores a 5/6 on our valuation checks, suggesting the stock still appears undervalued on most metrics. Next we will walk through the different valuation approaches behind that score, and then finish with a broader way to think about TD’s worth that goes beyond any single model.
Approach 1: Toronto-Dominion Bank Excess Returns Analysis
The Excess Returns model looks at how much value Toronto-Dominion Bank can create above its cost of equity, based on its profitability and growth in book value per share.
For TD, the starting point is a Book Value of about CA$73.79 per share and a Stable EPS of roughly CA$9.41 per share, derived from weighted future Return on Equity estimates from 10 analysts. With an Average Return on Equity of 12.92% and a Stable Book Value of CA$72.81 per share, the bank is expected to keep generating earnings on its equity base.
The key to this approach is the spread between the Cost of Equity, estimated at CA$5.28 per share, and the Excess Return of CA$4.13 per share. That excess is what the model capitalizes to arrive at an intrinsic value, which in TD’s case comes out above the current share price.
On this basis, the Excess Returns valuation implies the stock is about 23.6% undervalued, indicating that the market may not be fully pricing in TD’s ability to earn returns on its capital.
Result: UNDERVALUED
Our Excess Returns analysis suggests Toronto-Dominion Bank is undervalued by 23.6%. Track this in your watchlist or portfolio, or discover 914 more undervalued stocks based on cash flows.
Approach 2: Toronto-Dominion Bank Price vs Earnings
For a consistently profitable bank like Toronto-Dominion, the price to earnings ratio is a natural way to judge value, because it links what investors pay today to the profits the bank is generating right now. In general, stronger expected earnings growth and lower perceived risk justify a higher normal PE, while slower growth or higher risk point to a lower multiple.
TD currently trades on a PE of about 10.64x, which is roughly in line with the broader Banks industry average of about 10.84x, but sits at a noticeable discount to its large player peer group, which averages around 15.64x. To go a step further, Simply Wall St calculates a Fair Ratio of about 11.54x for TD, which is the PE you might expect given its earnings growth outlook, profitability, risk profile, industry positioning and market cap.
This Fair Ratio is more informative than a simple comparison to peers or the sector because it is tailored to TD’s own fundamentals rather than a one size fits all benchmark. With the stock trading below its Fair Ratio, the PE perspective points to TD being modestly undervalued at current levels.
Result: UNDERVALUED
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Upgrade Your Decision Making: Choose your Toronto-Dominion Bank Narrative
Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, an easy tool on Simply Wall St's Community page where you connect your own story about Toronto-Dominion Bank to concrete forecasts for its future revenue, earnings and margins. You can then translate that into a Fair Value that you can compare with today’s share price to decide whether to buy, hold or sell, while the numbers update dynamically as new news or earnings arrive. For example, one TD Narrative on the platform assumes tougher fintech and regulatory headwinds, shrinking margins to around 23.5%, slower revenue, and a Fair Value close to CA$106. Another, more optimistic view, leans into digital execution, capital returns and a higher future PE near 16.9x to justify a Fair Value closer to CA$125. This illustrates how different yet structured perspectives can coexist and helps you see exactly which assumptions you agree with before you act.
Do you think there's more to the story for Toronto-Dominion Bank? 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.
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