Is the Commonwealth Bank of Australia (ASX: CBA) share price cheap at $77?
CBA share price V. the rest
Over the past six months, the price of CBA shares has fallen more than 9%, which is the worst performance of all the major banks including Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) and National Australia Bank Ltd. (ASX: NAB).
Although Commbank is the largest bank in the housing market it may incorrect to suggest that the selloff is a result of a slowing property market.
Instead, I think it may be a result of the allegations of money laundering from AUSTRAC, the Government's regulator for financial system security. The media was speculating that the fines associated with CBA's breaches could stretch into the hundreds of millions of dollars.
While the potential penalty for each of its 53,700 breaches is $18 million, some analysts are already suggesting that figure may be a bit farfetched.
According to an article in Livewire Markets, analysts at Clime Asset Management say CBA shares currently trade at a valuation discount to their peers. Currently, the stock is valued at $79.42 according to the article.
In my opinion, a 3% margin for error, the difference between market price ($77) and the valuation ($79.42), is too narrow to justify a buy rating on CBA shares.
Foolish Takeaway
The average valuation of the 15 analysts covering Commonwealth Bank shares is $81, which is only a modest valuation discount. In my opinion, shares of CBA would have to fall well below $70 for me to call it a "bargain".
