Commonwealth Bank of Australia (ASX: CBA) shares have delivered some outsized gains since late January.
On 21 January, shares in the S&P/ASX 200 Index (ASX: XJO) bank stock closed trading for $147.22. On Tuesday, those same shares closed the day changing hands for $171.12 apiece.
That sees CBA shares up 16.23% in just over two months. For some context, the ASX 200 is down 4.59% since market close on 21 January.
What makes this outperformance even more remarkable is that CBA traded ex-dividend on 18 February. While CommBank won't pay out the fully-franked interim dividend of $2.35 a share until 30 March, investors who owned the ASX 200 stock at market close on February 17 will be looking forward to receiving that.
So, if we add that $2.35 back into Tuesday's closing price of $171.12 a share, then the accumulated value of CBA shares is up an even more impressive 17.83% since 21 January. With some potential tax benefits from those franking credits.
Clearly, then, you're unlikely to hear investors who bought in late January complaining about their returns to date.
But looking ahead, Medallion Financial Group's Philippe Bui forecasts mounting headwinds for Australia's biggest bank (courtesy of The Bull).
Here's why.
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CBA shares: Buy, hold, or sell?
"CBA remains the highest quality franchise among Australia's major banks, but the valuation now looks stretched," said Bui, who has a sell recommendation on CBA shares.
"The stock trades on a price-to-earnings multiple well above its peers despite similar earnings growth prospects," Bui noted.
Indeed, CBA trades on a P/E ratio of around 28 times.
By comparison, Westpac Banking Corp (ASX: WBC) trades on a P/E ratio of around 20 times; ANZ Group Holdings Ltd (ASX: ANZ) trades on a P/E ratio of around 19 times; and National Australia Bank Ltd (ASX: NAB) trades on a P/E ratio of around 21 times.
And with the share price leaping higher, Bui was lukewarm on CBA's passive income potential.
"The recent annual dividend yield around 3% is modest compared with other income opportunities," he noted.
Bui concluded:
With credit growth slowing and net interest margins stabilising, we believe earnings momentum is unlikely to justify such a premium valuation. After a strong share price run, investors may want to consider taking profits and reallocating capital to more attractively valued opportunities.
How has the ASX 200 bank stock performed longer term?
Taking a step back, CBA shares have gained 16% over 12 months, not including dividends.
The ASX 200 is up 5.58% over this same time.
