Commonwealth Bank of Australia (ASX: CBA) shares have been enjoying a momentous rally of late.
Defying a chorus of bearish analysts, shares in the S&P/ASX 200 Index (ASX: XJO) bank stock have rocketed 29.34% over the past year. That's close to three times the 10.33% gains posted by the ASX 200 over this same period.
And this strong share price performance doesn't include the $4.55 a share in fully franked dividends CBA paid out over the year.
Of course, that's all water under the financial bridge.
The million-dollar question now is, at yesterday's closing price of $132.66, would I be crazy to buy CBA shares now?
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What's been sending the ASX 200 bank stock soaring?
CommBank has been enjoying a big uplift in investor sentiment towards bank stocks in general. That's come amid higher interest rates, attractive net interest margins, and soaring profits amongst the big banks.
CBA shares also look to have been benefiting more recently from the FY 2025 stage 3 tax cuts and other government cost-of-living relief measures. These could spur additional consumer and business lending and help keep a lid on the level of non-performing loans.
As for the bank's recent financial metrics, CBA reported $13.65 billion of operating income in H1 FY 2024, a slight uptick from the prior corresponding period. The bank's $5.02 billion in cash net profit after tax slipped 3%. But the $2.15 a share interim dividend was up 2.4%, pleasing passive income investors.
With CBA shares continuing to charge higher, the big four bank overtook BHP Group Ltd (ASX: BHP) last Friday to reclaim the crown of the biggest company on the ASX. BHP held that honour since it surpassed CBA back in November 2021 amid a big iron ore rally at the time.
Which brings us back to our headline question.
Should I buy CBA shares now?
I don't own CBA shares outside of my superannuation fund. While I wish I'd snapped up some shares in the ASX 200 bank stock 12 months ago, I don't expect the next 12 months to see the same kind of strong gains.
Part of my reluctance to buy shares today echoes the valuation concerns aired by a host of analysts. CommBank currently trades at a price-to-earnings (P/E) ratio of 23.19 times. That's the highest valuation of any of the ASX 200 bank stocks.
Of course, many analysts have been sounding the alarm on CBA's high valuation for more than a year now. And look what's happened.
I also don't think the CBA share price will plunge below $100 to as low as $80, as some analysts predict. I believe we'll only see that kind of sell-off if the broader market crashes.
But with competition still running high in the lucrative mortgage space and the potential for a material increase in bad loans the longer Aussie interest rates stay high, I think there are better opportunities on the ASX for market-beating gains in the year ahead.
