The Commonwealth Bank of Australia (ASX: CBA) share price has been one of the biggest talking points on the ASX.
The banking giant's shares are currently trading at $164.76. That compares with a 52-week low of $146.97 and a 52-week high of $192.00.
So, after that pullback from its highs, how should investors think about its valuation?
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Start with earnings
One simple way to value CBA is to compare its share price with expected earnings.
Consensus estimates have CBA generating earnings per share of $6.54 in FY 2026 and $7.04 in FY 2027. That compares with $6.17 per share in FY 2025.
This means the market is expecting earnings per share to grow by approximately 6% in FY 2026 and then a further 8% in FY 2027. Across the two-year period, that works out to compound annual earnings growth of approximately 7%.
Based on the current share price of $164.76, CBA is trading on approximately 25.2x estimated FY 2026 earnings.
Looking further ahead, the bank is trading on approximately 23.4x estimated FY 2027 earnings.
That is a high multiple for a major bank, particularly one with earnings expected to grow at a mid to high single-digit rate rather than at the pace normally associated with high-growth companies.
How does that compare historically?
This is where the valuation debate becomes more interesting.
Over the past 10 years, CBA's average annual price-to-earnings ratio has ranged from around 13.5 times to 24.7 times. Across those years, the average comes out at approximately 17.3 times earnings.
That means CBA is still trading well above its longer-term average multiple, even after falling from its 52-week high.
There are reasons why investors have been willing to pay a premium. CBA has the strongest retail banking franchise in Australia, a leading digital offering, a large deposit base, and a track record of strong profitability.
But valuation is still important. A great business can produce disappointing returns if investors pay too much for it.
What about dividends?
Income investors may also value CBA based on its dividends.
The market expects fully franked dividends of $5.15 per share in FY 2026 and $5.45 per share in FY 2027. That is up from $4.86 per share in FY 2025.
Based on the current share price, this implies forward dividend yields of approximately 3.1% in FY 2026 and 3.3% in FY 2027.
Those dividend yields are useful, especially once franking credits are included. But they are not especially high compared with some other ASX dividend shares or with what CBA itself has offered at lower valuations in the past.
Is the CBA share price good value?
CBA remains a very high-quality bank. Its brand, technology, customer base, and balance sheet strength all help justify a valuation premium.
The question is how much of a premium is reasonable.
At more than 23x FY 2027 earnings, the market is valuing CBA more like a growth stock than a traditional bank. Yet the earnings outlook points to steady growth rather than explosive growth.
There is a reason that investors are willing to pay up. Defensive earnings, strong capital levels, fully franked dividends, and a dominant retail banking franchise are all valuable, particularly in uncertain markets.
But investors still need to ask whether they should value those qualities this highly.
The CBA share price is no longer at its highs, but on traditional earnings measures, it still arguably looks expensive compared with its own history.
For the current valuation to be justified, the bank may need to keep delivering clean earnings growth, defend margins, and avoid a meaningful deterioration in credit quality. That's easier said than done in the current environment.
