I'm getting nervous about the CBA share price

The higher CBA climbs, the more nervous I get.

| More on:
A worried woman looks at her phone and laptop, seeking ways to tighten her belt against inflation.

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

If you've missed the big news about the Commonwealth Bank of Australia (ASX: CBA) share price this month, you might just be living under a rock.

This February has been one for the CBA record books. The ASX 200 bank stock has once again hit a series of new all-time record highs, pushing its shares further into uncharted territory.

Yesterday's session wasn't kind to Commonwealth Bank, with CBA finishing the day nursing a 1.44% loss at $162.60 a share. Saying that, we only have to go back to last Friday's session to find the last time CommBank hit a new record. That was $167.92 a share, which exceeded the previous all-time high of $167.61 that was hit just one day prior.

Although the bank is now well off that high, CBA shares remain up a comfortable 6.10% over just 2025 to date, as well as by almost 40% over the past 12 months.

This has been a lucrative journey for almost all Australians. Even if you don't own CBA shares directly, the bank's oversized presence in index funds like the Vanguard Australian Shares Index ETF (ASX: VAS), as well as our superannuation funds, means we all can be grateful for CBA's share price ascension.

However, this is also what is making me nervous.

The CBA share price can't stop hitting new records

It's no secret that most ASX experts think CBA shares are overvalued at their current heights.

As it stands today, the bank is sitting on a price-to-earnings (P/E) ratio of 28.67.

That would be a decent valuation if CBA was growing at a healthy clip. However, it's hard to make that case.

In its most recent half-year earnings, which we got a look at just last week, CBA revealed that its operating income rose by 3% to $14.1 billion over the six months to 31 December. That helped boost the bank's cash net profits by 2% to $5.13 billion.

Now those are… fine numbers. But enough to justify a 40% share price spike over the past 12 months? Not really, in my view anyway. Particularly when we consider that CBA's FY2024 full-year results showed falling income and profits.

CBA's current valuation is better understood when compared to other shares. For one, investors are today being asked to pay a 100% premium on each dollar that CBA brings in compared to what its fellow big four bank stock, ANZ Group Holdings Ltd (ASX: ANZ), makes.

Yep, ANZ shares are currently at a P/E ratio of 14.23. With CBA at an earnings multiple of 28.67, it can literally be considered twice as expensive as ANZ right now.

Some other shares that are cheaper than this ASX 200 bank stock…

Let's list some other companies that are cheaper on a P/E basis to CBA right now. Of course, there's Coles Group Ltd (ASX: COL) and Woolworths Group Ltd (ASX: WOW).

But also Macquarie Group Ltd (ASX: MQG), Medibank Private Ltd (ASX: MPL), and Endeavour Group Ltd (ASX: EDV).

If we look at the US markets, the contrast is even more stark. US stocks that are currently cheaper than CBA include globally dominant companies like Coca-Cola Co (NYSE: KO) and PepsiCo Inc (NASDAQ: PEP), but also American Express Co (NYSE: AXP) and JPMorgan Chase & Co (NYSE: JPM). The latter is often regarded as one of the best banks in the world.

Even Google-owner Alphabet Inc (NASDAQ: GOOG)(NASDAQ: GOOGL) is cheaper than CBA with a current P/E ratio of 24.2. Bear in mind that Alphabet reported a 12% rise in revenues and a 28.3% spike in net income during its most recent quarterly earnings report this month.

So yes, I am nervous about CBA shares. It seems that the only thing holding up the company right now is goodwill and good vibes. Certainly not fundamental growth numbers. If the bank does come back down to earth, it will be bad news for everyone's index and super funds. Let's see what happens over the rest of 2025.

Should you invest $1,000 in Fortescue Metals Group right now?

Before you buy Fortescue Metals Group shares, consider this:

Motley Fool investing expert Scott Phillips just revealed what he believes are the 5 best stocks for investors to buy right now... and Fortescue Metals Group wasn't one of them.

The online investing service he’s run for over a decade, Motley Fool Share Advisor, has provided thousands of paying members with stock picks that have doubled, tripled or even more.*

And right now, Scott thinks there are 5 stocks that may be better buys...

See The 5 Stocks *Returns as of 30 April 2025

American Express is an advertising partner of Motley Fool Money. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. JPMorgan Chase is an advertising partner of Motley Fool Money. Motley Fool contributor Sebastian Bowen has positions in Alphabet, American Express, Coca-Cola, Endeavour Group, PepsiCo, and Vanguard Australian Shares Index ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Alphabet, JPMorgan Chase, and Macquarie Group. The Motley Fool Australia has positions in and has recommended Coles Group and Macquarie Group. The Motley Fool Australia has recommended Alphabet. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Bank Shares

Worried woman calculating domestic bills.
Bank Shares

Which 2 big ASX bank shares will be most impacted by RBA rate cuts according to Macquarie?

Which banks could see the most pain from RBA rate cuts?

Read more »

A man sits thoughtfully on the couch with a laptop on his lap.
Earnings Results

Bank of Queensland share price lifts off on soaring profits and boosted dividend

ASX investors are piling into Bank of Queensland shares on Wednesday. Here’s why.

Read more »

A small child in a judo outfit with a green belt strikes a martial arts pose with his hand thrust forward.
Bank Shares

3 reasons to buy this quality ASX 200 bank stock today

Up 27% in a year, a leading expert forecasts more upside potential for this ASX 200 bank stock.

Read more »

A woman sits at her computer with her hand to her mouth and a contemplative smile on her face as she reads about the performance of Allkem shares on her computer
Bank Shares

Is this the right time to invest in Westpac shares?

Is this blue-chip bank an appealing option right now?

Read more »

Woman and man calculating a dividend yield.
Bank Shares

2 ASX 200 bank stocks to sell today: Bell Potter

Bell Potter forecasts more headwinds in 2025 for these two ASX 200 banks.

Read more »

Two boys lie in the grass arm wrestling.
Share Market News

Regional bank battle:Bendigo Bank or Bank of Queensland shares?

Looking outside the big four? These two regional banks might be worth considering

Read more »

A man watches the share price movement closely.
Bank Shares

I want to buy CBA shares. What price should I pay?

What would be a good valuation to buy CBA at?

Read more »

Buy, hold, and sell ratings written on signs on a wooden pole.
Bank Shares

ANZ shares: Buy, sell, hold?

With the ANZ share price in retreat, the bank stock’s dividend yield is now at 6.2%.

Read more »