One of the best performers on the S&P/ASX 200 (Index: ^AXJO) (ASX: XJO) in the last 12 months has been the Australia and New Zealand Banking Group (ASX: ANZ) share price.
Not only has the banking giant outperformed the market average, but with a staggering 42% gain it has outperformed the rest of the big four banks by some distance.
In fact, the next best performer among the big four banks is National Australia Bank Ltd. (ASX: NAB) with its 30% gain.
Whilst I was bullish on the bank this time last year following a huge sell-off, I can't really say the same any longer unfortunately.
Although I wouldn't necessarily be in a rush to sell shares, I certainly wouldn't be a buyer at the current price due to its exorbitant valuation.
At present ANZ's shares are not far from their 52-week high and changing hands at 16x trailing earnings and 1.6x book value.
As well as being a premium to the sector averages of 13.5x and 1.3x, respectively, this is a significant premium over its historical average.
Based on data provided by CommSec ANZ's shares have traded at an average of 12.5x earnings in the last 10 years.
Whilst it is generally accepted that in a low interest environment investors are willing to pay higher prices to own shares, I think the current share price is beginning to become a little excessive.
Because of this I think there is far more downside risk than upside potential for investors starting an investment today.
So for this reason I would suggest investors avoid the banks for the time being and focus on other areas of the market that provide far better value for money.
