Is the CBA share price a buy after the bank's FY22 results?

Is now a good time to buy CBA's shares?

James Mickleboro

Author Bio James Mickleboro is an investment writer and analyst who has worked with The Motley Fool Australia for 10 years, covering ASX shares, market news, broker research, dividends, growth stocks, and long-term investing ideas. Over that time, James has written extensively about Australian equities and developed a particular focus on helping everyday investors understand the stories behind share price moves, company announcements, broker views, and broader market trends. His best investment recommendation was identifying Afterpay while it was still a small-cap growth share, before its rise into one of Australia’s biggest technology success stories. His worst investment lesson came from CSL Ltd (ASX: CSL), where he was burnt by believing management could turn the business around sooner than the market ultimately allowed. Areas of Expertise ASX shares Growth and dividend investing Broker research Interpreting company announcements Market news Portfolio strategy Long-term wealth creation Education Bachelor of Politics, Philosophy and Economics. CFA Institute Social Media LinkedIn Favorite Investment Quote "It’s far better to buy a wonderful company at a fair price than a fair company at a wonderful price." — Warren Buffett

Published August 11, 2022 7:39 am AEST

The Commonwealth Bank of Australia (ASX: CBA) share price was out of form on Wednesday.

The banking giant's shares ended the day 0.3% lower at $101.00.

A woman in a bright yellow jumper looks happily at her yellow piggy bank. — Image source: Getty Images

Why did the CBA share price edge lower?

Investors were selling down the CBA share price despite the banking giant delivering a full year result a touch ahead of expectations.

For example, according to a note out of Goldman Sachs, the bank's earnings were 2% ahead of its expectations thanks to better than expected bad and doubtful debts. In addition, the CBA final dividend was slightly ahead of the broker's expectations and its CET1 ratio was 8 basis points ahead of estimates at 11.5%.

Judging by the CBA share price performance, it seems as though the market was expecting an even stronger result. And with that not coming, they decided to hit the sell button.

Is it time to invest?

Unfortunately, despite Australia's largest bank outperforming its expectations, Goldman Sachs hasn't seen enough to change its recommendation.

It continues to rate the bank as a sell with an improved price target of $86.86.

Based on the current CBA share price, this implies potential downside of 14% for investors over the next 12 months.

Why is Goldman bearish?

While Goldman acknowledges that CBA is a high quality bank and that its fundamentals remain strong, it just can't justify the premium valuation of the CBA share price.

It explained:

Overall we reiterate our Sell rating, given: i) while operating trends remain strong with volume growth best amongst the major bank peer group (3 month annualised 0.9x system vs. NAB also at 0.9x, WBC 0.7x, ANZ 0.6x), and ii) CBA has the best leverage of the major banks to higher rates, iii) it is also more exposed to sector wide headwinds such as intense mortgage price competition, as well as further potential macro downside that appears likely to more adversely impact the household this cycle. Overall, we do not believe its fundamentals justify the 56% 12-mo forward PER premium it is currently trading on versus peers, compared to the 19% historic average.

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