Shares in Commonwealth Bank of Australia (ASX: CBA) have skyrocketed 79c or 1% today, surpassing yet another all-time high price.
The stock reached a high of $82.56 in early afternoon trading, topping its previous record high of $82.44. Despite the many warnings from analysts (and myself, admittedly) the stock just keeps on going! It has hugely exceeded many investors' expectations and is threatening to go even higher.
Could the bank possibly climb just another 3% to surpass the $85 mark? Or could it even top the $87.80 forecast set by one bullish broker? Or get to what would be an incredible milestone of $90 per share?
That's only 9% away. It is certainly a possibility – particularly given the momentum they have had over the last few years – they have already climbed more than 95% since September 2011.
That kind of performance could even see the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) hit the milestone 6,000 point mark. That would only take another 9.4% as well with the index currently hovering just below 5,500 points.
On the other hand…
In this Fool's (note the capital 'F') opinion however, I just can't see that happening. Or, at least, I can't see it happening in the long-term.
There's no denying the momentum the shares have carried, and it seems like investors just keep wanting more and more (and more). It would only take another three days like today to get it over the $85 per share barrier and who knows what could happen thereafter.
But already the bank is trading on a lofty P/E ratio of 15.4 – well above its 10-year average of around 13.2. Likewise, it is trading on a Price-book ratio of 2.95, indicating the market is already paying a (very) high premium just to hold the shares.
The yield that used to make investors' mouths water
Not even its dividend yield is that attractive anymore. The yield is now just 4.6% – that's not even as high as those offered by Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ) or National Australia Bank Ltd (ASX: NAB), and theirs aren't all that appealing anymore either, based on the companies' future earnings potential.
It seems the risk of capital losses now outweighs the dividend benefits…
A better place for tomorrow's money, today…
Any value now appears to be fully priced into Commonwealth Bank's shares. While momentum could certainly drive the stock to new highs over the coming weeks, or even months, I think investors will soon catch on to just how expensive the shares are.
