It's been a while since I've written the following statement, but Commonwealth Bank of Australia (ASX: CBA) shares have had a big drop in recent weeks. It was only back in late June that the ASX's largest bank stock had hit its latest all-time record high, this one at a flat $192 a share.
It represented an extraordinary runup for CBA, which had been under $150 a share as recently as April.
However, that runup, well, ran its course. Unlike the broader S&P/ASX 200 Index (ASX: XJO), CBA shares have had a lacklustre July, with the bank down more than 5.3% since the end of June.
What's more, at current pricing, CBA is down by more than 9% from the June peak of $192. This is a rare pullback from this uber-popular investment and staple of Australian share portfolios.
So, with CBA now looking considerably cheaper than it has been for a while, should ASX investors be looking to buy today?
Are CBA shares in the buy zone after a 9% drop?
Well, to answer that, let's look at some statistics.
Despite this share price correction, if we can call it that, CBA stock has increased by more than 29% over the past 12 months and more than 60% over the past two years. That's despite earnings and profits remaining relatively steady.
At the current share price, this ASX 200 bank is sitting on a price-to-earnings (P/E) ratio of 30.8. Its dividend yield remains well under 3% at 2.73%.
None of these metrics indicates anything other than CBA remaining comfortably in overvalued territory, at least in my opinion.
For one, a 2.73% dividend yield is woefully low by ASX bank standards. All three of the other major banks are trading on dividend yields of over 4% right now.
For another, an earnings multiple for a bank of over 30 is almost unheard of, not just in Australia but worldwide. The next closest big four bank is Westpac Banking Corp (ASX: WBC), with a P/E ratio of 16.92 today. Even JP Morgan Chase & Co (NYSE: JPM), often regarded as one of the best banks in the world, is on a P/E ratio of 15.32 right now.
With all that in mind, it's hard to call CBA shares anything other than excessively expensive right now, even after the slightly cheaper pricing we are seeing. But then again, Commonwealth Bank seems to live by its own set of rules, so who knows what's next for this ASX bank stock.
