Commonwealth Bank of Australia (ASX: CBA) shares are marching higher today.
Shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed yesterday trading for $164.55. In morning trade on Thursday, shares are changing hands for $167.56 apiece, up 1.8%.
For some context, the ASX 200 is up 0.7% at this same time.
As you likely know, CommBank stock enjoyed a multi-year run of outperformance, culminating in shares hitting a new all-time closing high of $191.40 on 25 June.
Since then, however, Australia's biggest bank has faced mounting headwinds, as witnessed by the 12.5% share price decline since 25 June's high-water mark.
Taking a step back, CBA shares remain up 19.7% since this time last year. And that doesn't include the $4.85 a share in fully franked dividends the bank paid out to eligible shareholders over the 12 months.
Which could make today an opportune time to take some profits on the blue-chip stock.
Image source: Getty Images
Time to take profits on CBA shares?
Morgans' Damien Nguyen recently ran his slide rule over CommBank stock (courtesy of The Bull).
And on the surface, he sounded quite impressed with the business.
"The CBA remains Australia's most profitable bank, with a sector-leading return on equity and a dominant position in mortgages and deposits," Nguyen said.
Explaining his sell recommendation on CBA shares, he added, "However, in our view, its share price has surged well beyond fundamentals, trading at a significant premium to peers."
Indeed, despite the retreat from its record highs, at the current share price, CBA trades on a price-to-earnings (P/E) ratio of around 28 times.
Comparing that to the other big four ASX 200 bank stocks:
- ANZ Group Holdings Ltd (ASX: ANZ) shares trade on a P/E ratio of around 15 times.
- National Australia Bank Ltd (ASX: NAB) shares trade on a P/E ratio of around 19 times.
- Westpac Banking Corp (ASX: WBC) shares trade on a P/E ratio of just over 19 times.
With this in mind, Nguyen recommends reducing exposure to CBA shares:
We continue to recommend reducing overweight positions, citing compressed return expectations and elevated trading multiples. While CBA's quality is undisputed, we believe the risk-reward profile at current levels is unfavourable.
What's the latest from CommBank?
CBA reported its full-year financial results (FY 2025) on 13 August.
Among the core financial metrics, the bank achieved a 7% year-on-year increase in statutory net profit after tax (NPAT) to $10.13 billion, up 7% from FY 2024. Cash net profit after tax of $10.25 billion was up 4%.
With profits up, management declared a final fully-franked dividend of $2.60, up 4% from last year's final payout.
With market expectations high, CBA shares closed down 5.4% on the day the bank reported.
