Wondering if Commonwealth Bank of Australia shares are worth a closer look right now? If you have ever questioned whether the stock is truly good value or just riding positive momentum, you're not alone. After a strong run, CBA's share price is up 12.0% over the past year and a significant 161.1% over five years. However, it has dropped 6.2% in just the last week. Swings like these often signal changing views on the company's growth prospects and the level of risk investors are willing to take. Recent headlines highlight that Australia's banking sector is facing new regulatory attention and shifting economic signals, both of which can influence market confidence quickly. For CBA specifically, ongoing discussions about mortgage market share and digital banking competition have been prominent topics for many investors. According to our checks, the company's valuation score comes in at 0 out of 6, indicating that CBA does not appear undervalued on traditional metrics at this time. However, valuation is not always as straightforward as a scorecard, so let's break down the main approaches analysts use to assess value and explore a more nuanced perspective.

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 valuation model examines how much profit a company can generate on its shareholders’ capital above the cost of that capital. By focusing on returns over and above the cost of equity, this approach provides insight into whether the bank is truly creating value or simply treading water.

For Commonwealth Bank of Australia, the key metrics are:

Book Value: A$47.12 per share Stable EPS: A$6.71 per share (Source: Weighted future Return on Equity estimates from 13 analysts.) Cost of Equity: A$3.90 per share Excess Return: A$2.81 per share Average Return on Equity: 13.45% Stable Book Value: A$49.92 per share (Source: Weighted future Book Value estimates from 10 analysts.)

This model estimates Commonwealth Bank of Australia’s fair value at A$112.17 per share. However, based on the current share price, the Excess Returns model suggests the stock is trading at a 45.7% premium, meaning it is significantly overvalued according to this approach.

Result: OVERVALUED

Our Excess Returns analysis suggests Commonwealth Bank of Australia may be overvalued by 45.7%. Discover 865 undervalued stocks or create your own screener to find better value opportunities.CBA Discounted Cash Flow as at Nov 2025

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.

Story Continues

Approach 2: Commonwealth Bank of Australia Price vs Earnings

The Price-to-Earnings (PE) ratio is a favored tool for valuing profitable banks like Commonwealth Bank of Australia, as it shows how much investors are paying for each dollar of earnings. This makes it especially useful for stable, mature firms with reliable profits.

What constitutes a “normal” or “fair” PE ratio depends on factors such as future earnings growth expectations and perceived risk. Higher growth or lower risk typically justifies a higher PE, while slow growth or high risk results in a lower PE being considered fair value.

Currently, CBA trades at a PE ratio of 27x. This is noticeably above the Banks industry average of 10x and the peer average of 17x. However, it is important to consider more than just a simple average when judging whether this premium is warranted.

This is where the Simply Wall St “Fair Ratio” comes in. The Fair Ratio, calculated at 21.5x for CBA, provides a customized benchmark that factors in the company's expected earnings growth, profit margins, market risks, industry trends, and market capitalization. This approach offers a more accurate context for valuation than comparing with generic industry or peer averages, which do not account for company-specific advantages and threats.

Comparing CBA’s current PE of 27x to its Fair Ratio of 21.5x, the stock appears to be priced somewhat higher than its fundamentals would suggest.

Result: OVERVALUEDASX:CBA PE Ratio as at Nov 2025

PE ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1399 companies where insiders are betting big on explosive growth.

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

Earlier, we mentioned that there is an even better way to understand valuation, so let's introduce you to Narratives. A Narrative is a powerful, story-driven tool that lets you capture your unique perspective on a company by connecting its business story to your own financial forecasts and what you believe is a fair value, instead of just relying on raw numbers or consensus estimates. Narratives take things a step further by allowing you to quickly link your view of future revenue, earnings, and margins with real market events, helping you decide whether the current price represents a buying opportunity or a signal to wait.

On Simply Wall St’s Community page, millions of investors use Narratives as an easy, accessible way to map their personal investment thesis against the latest data, and every Narrative updates automatically as new information (such as news headlines or earnings) is released. For example, right now some investors use their Narrative to highlight CBA’s technology investment and customer loyalty as drivers of long-term growth, supporting a price target of up to A$146.00. Others point to digital competition and pressure on margins, leading them to set a much more cautious target around A$100.00. In short, Narratives let you bridge the gap between numbers and meaning so you can make smarter, faster decisions that truly reflect your view of Commonwealth Bank of Australia.

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 Community Fair Values as at Nov 2025

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.

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