Track your investments for FREE with Simply Wall St, the portfolio command center trusted by over 7 million individual investors worldwide.

If you are wondering whether Commonwealth Bank of Australia at around A$159.89 is offering fair value or carrying a premium, you are not alone. The stock has seen a 5.6% return over the last 7 days and 4.4% over the last 30 days, while the year to date return sits at a 0.8% decline and the 1 year return at 1.1%, with longer term 3 year and 5 year returns of 63.3% and 123.1% respectively. Recent coverage has focused on Commonwealth Bank of Australia as one of the major Australian banks, with investors paying close attention to how it is positioned within the local financial sector and broader equity market. This context helps frame the recent price moves, as the market continually updates its expectations for large, established lenders like CBA. Right now, Commonwealth Bank of Australia has a value score of 0 out of 6, based on our checks of whether the stock appears undervalued across several metrics. Next, we will walk through those valuation approaches and hint at a more complete way to think about value at the end of the article.

Commonwealth Bank of Australia scores just 0/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: Commonwealth Bank of Australia Excess Returns Analysis

The Excess Returns model looks at how much profit a company generates above the return that equity investors require, then capitalises those extra profits into a per share value.

For Commonwealth Bank of Australia, the starting point is its Book Value of A$47.12 per share and a Stable EPS estimate of A$6.71 per share, sourced from weighted future Return on Equity estimates from 13 analysts. The model applies a Cost of Equity of A$3.93 per share, which implies an Excess Return of A$2.78 per share. In simple terms, this is the surplus profit the bank is estimated to earn over the required return on its equity base.

The analysis also uses an Average Return on Equity of 13.45% and a Stable Book Value of A$49.92 per share, based on weighted future Book Value estimates from 9 analysts. These inputs are combined to arrive at an intrinsic value of A$113.22 per share under the Excess Returns approach.

Compared with the current share price of about A$159.89, this model implies that Commonwealth Bank of Australia is trading at a 41.2% premium to its estimated intrinsic value.

Result: OVERVALUED

Our Excess Returns analysis suggests Commonwealth Bank of Australia may be overvalued by 41.2%. Discover 11 high quality undervalued stocks or create your own screener to find better value opportunities.

Story Continues

CBA Discounted Cash Flow as at Feb 2026

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for Commonwealth Bank of Australia.

Approach 2: Commonwealth Bank of Australia Price vs Earnings

For a profitable bank like Commonwealth Bank of Australia, the P/E ratio is a useful way to relate what you pay per share to the earnings that each share generates. It gives you a quick sense of how much the market is willing to pay today for A$1 of current earnings.

What counts as a “normal” or “fair” P/E depends on what investors expect for future earnings growth and how much risk they see in those earnings. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth or higher risk usually points to a lower P/E.

Commonwealth Bank of Australia currently trades on a P/E of 26.38x, compared with an average of 11.35x for the Banks industry and 17.45x for its peer group. Simply Wall St’s Fair Ratio for the company is 22.33x. This Fair Ratio is a proprietary estimate of what the P/E “should” be, based on factors like earnings growth, profit margins, the bank’s size, its risks and its industry, rather than just a straight comparison with peers.

Since the current P/E of 26.38x is above the Fair Ratio of 22.33x, the stock looks expensive on this measure.

Result: OVERVALUEDASX:CBA P/E Ratio as at Feb 2026

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 4 top founder-led companies.

Upgrade Your Decision Making: Choose your Commonwealth Bank of Australia Narrative

Earlier we mentioned that there is an even better way to understand valuation. Let us introduce you to Narratives, where you tell the story behind your numbers by linking your view of Commonwealth Bank of Australia’s future revenue, earnings and margins to a forecast, and then to a fair value that you can easily compare with today’s share price. All of this happens within Simply Wall St’s Community page that is used by millions of investors. The Narrative updates automatically as new news or earnings arrive. For example, a bullish investor might set a fair value closer to A$139.60 based on assumptions like revenue growing around 7.1%, margins near 36.6% and a future P/E of about 23.63x. A more cautious investor might anchor near A$99.81 using revenue growth closer to 4.8%, margins around 33.7% and a future P/E of roughly 19.51x. You can see both side by side and decide which story fits your own expectations.

Do you think there's more to the story for Commonwealth Bank of Australia? Head over to our Community to see what others are saying!ASX:CBA 1-Year Stock Price Chart

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include CBA.AX.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email [email protected]

View Comments