Westpac Banking Corp (ASX: WBC) shares were on form on Monday.
The banking giant's shares rose over 2.5% to $27.12.
Investors were buying the company's shares in response to its half-year results.
In case you missed it, Westpac's net profit before one-offs came in at $3,506 million. This represents an 8% decline on the prior corresponding period and a 1% fall on the second half of FY 2023.
However, this was ahead of expectations. As was its interim dividend of 75 cents per share and surprise 15 cents per share special dividend, and its $1 billion on-market share buyback.
This gain leaves Westpac's shares trading within touching distance of their 52-week high of $27.70.
But can they go higher from here? Let's take a look at what one leading broker is saying after updating its financial model.
Can Westpac shares keep rising?
According to a note out of Goldman Sachs, its analysts believe that Australia's oldest bank's shares are fully valued at current levels.
The broker has responded to the result by retaining its neutral rating with an improved price target of $24.10.
Based on its current share price, this implies a potential downside of 11% for investors over the next 12 months. Though, with Goldman estimating a 6.1% dividend yield this year, the overall potential loss on investment is reduced to 5%.
While Goldman sees a number of positives, it also sees risks on the horizon. So, with Westpac's shares trading at a reasonably large premium to historical multiples, it doesn't believe the risk/reward is sufficient right now to have a more positive recommendation. The broker explains:
We believe that low industry-wide RWA growth and WBC's strong capital position, which even on a pro-forma basis is >12%, well above its 11.0-11.5% target ratio, underpins a sustainable payout ratio at the top of its 65-75% target range.
However, against this, WBC's technology simplification plan comes with a significant degree of execution risk, given historically banks' large-scale transformation programs have struggled to stay on budget, and we are currently operating in a stickier-than-expected inflationary environment. Therefore, trading on a 12-mo forward PER of 14.5x (14.0x ex-dividend adjusted, which is one standard deviation above its 15-year historic average of 12.7x), we stay Neutral.
Nevertheless, shareholders aren't likely to be too disheartened. After all, the Westpac share price is up almost 25% over the last 12 months. And that doesn't include the fully franked dividends the bank has paid to shareholders over the period.