Should You Reassess CBA Shares After Recent Price Surge and Record Highs in 2025?

If you’ve been eyeing Commonwealth Bank of Australia shares and wondering whether now’s the time to make a move, you’re not alone. With a closing price of $170.38, this banking heavyweight continues to have investors talking, and with good reason. Its stock has powered ahead with a 32.2% return over the past year, and a staggering 203.1% rise in five years. Even over shorter stretches, gains have remained robust, like the 3.3% bounce in just the last week. This signals ongoing interest and perhaps some renewed optimism in the broader banking sector.

Some of this momentum can be traced to favorable market trends lifting financial stocks. As global economic signals turned more positive, demand for established blue-chip names like CBA took off again. But even with such a bullish performance on the board, there’s always the nagging question: Is this growth justified, or are we stepping onto shakier ground as prices keep climbing?

To help make sense of it all, I took a look at the latest valuation checks across multiple measures. Here’s something you don’t see every day: CBA didn’t tick the box as undervalued on a single count, giving it a valuation score of zero out of six. Surprising, right? But before you draw any conclusions, let’s walk through how these valuation models work and why they might not tell the whole story. By the end, I’ll also share a perspective that could be even more powerful for sizing up the true value here.

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 is designed to measure how effectively a company uses shareholders' equity to generate profits above its cost of capital. In short, it looks at what is left over, or excess returns, once the basic cost of equity is covered. This gives investors a sense of whether the company’s existing assets are truly creating meaningful value.

For Commonwealth Bank of Australia, the key Excess Returns metrics are as follows:

• Book Value: A$47.12 per share
• Stable Earnings Per Share (EPS): A$6.69 per share (sourced from 13 analysts’ return on equity projections)
• Cost of Equity: A$3.86 per share
• Excess Return generated: A$2.83 per share
• Average Return on Equity: 13.47%
• Stable Book Value estimate: A$49.63 per share (drawn from 10 analysts)

Based on these figures, the Excess Returns model estimates an intrinsic value considerably lower than today's share price. This indicates the stock is trading at a 54.7% premium over its fair value. This suggests current investors may be banking on continued strong performance, but based on this model, the price appears stretched relative to its ability to generate returns above its cost of equity.

Result: OVERVALUED

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.

Our Excess Returns analysis suggests Commonwealth Bank of Australia may be overvalued by 54.7%. Find undervalued stocks or create your own screener to find better value opportunities.

Approach 2: Commonwealth Bank of Australia Price vs Earnings

For profitable companies like Commonwealth Bank of Australia, the price-to-earnings (PE) ratio is a widely used and direct way to gauge valuation. It tells investors how much they are paying for each dollar of current earnings, making it especially handy when earnings are robust and reliable, as they are with major banks. Since earnings are a bottom-line measure, the PE ratio makes it easier to see how the market is valuing a company relative to its peers and the broader industry.

Growth expectations and perceived risk play a big part in what counts as a “normal” or “fair” PE ratio. Generally, a company with higher expected growth or lower risk can justify a higher PE multiple compared to slower-growing or riskier counterparts. For CBA, the current PE ratio stands at 28.1x, which is notably higher than the average PE among industry peers (15.6x) and the broader banking industry (10.3x). This suggests investors are willing to pay a premium for CBA’s consistency and reputation.

However, rather than just relying on comparisons with industry and peers, Simply Wall St uses a proprietary measure called the “Fair Ratio.” This PE ratio estimate incorporates not only CBA’s growth prospects and margins, but also industry dynamics, market capitalization, and risk profile. The Fair Ratio for CBA is 20.1x, which is more attuned to what a long-term investor might consider reasonable, especially when factoring in qualitative aspects that simple averages miss.

Since CBA’s market PE of 28.1x sits significantly above the Fair Ratio of 20.1x, the shares look priced well above what fundamentals justify.

Result: OVERVALUED

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

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

Earlier we mentioned there is an even better way to understand valuation, so let's introduce you to Narratives—a smarter, more dynamic way to invest that goes beyond the numbers.

A Narrative is your own story about a company. It connects your reasoning or outlook (for example, expectations around digital disruption or mortgage risk) to concrete financial forecasts and ultimately to a fair value estimate. Instead of just relying on ratios or analyst targets, Narratives allow you to bring your view of future revenue, profit margins, and risks together with a valuation. This approach makes your assumptions explicit and actionable.

On Simply Wall St’s Community page, millions of investors use Narratives to test their views, update their fair value when news or earnings drop, and directly compare the stock’s Fair Value with its market Price to spot opportunities to buy or sell. Because Narratives update dynamically with new information, you always have a relevant and current view on your thesis.

For Commonwealth Bank of Australia, this means one investor’s Narrative could focus on headwinds from digital challengers and assign a fair value of just A$100 per share. Another might zoom in on the bank’s tech-driven growth and loyal customer base, arriving at a bullish A$146 target. Narratives make these perspectives clear, along with what drives them, so you can decide with confidence when the price is right for you.

Do you think there's more to the story for Commonwealth Bank of Australia? Create your own Narrative to let the Community know!

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com