Commonwealth Bank of Australia (ASX: CBA) shares are among the most popular investments on the ASX.
The bank has a leading customer franchise, a strong digital offering, and a long record of rewarding shareholders.
But how can investors tell whether they are getting value for money at the current share price?
I would look at several simple valuation measures rather than relying on only one.
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Start with the price-to-earnings ratio
CBA shares are trading around $176.07.
According to CommSec consensus estimates, the bank is forecast to generate earnings per share of $6.54 in FY26 and $6.72 in FY27.
That puts the shares on forward price-to-earnings ratios of approximately 26.9 times and 26.2 times, respectively.
CommSec data show CBA traded at an average annual price-to-earnings ratio of around 17.3 times across the 10 financial years to FY25. Its highest annual average during that period was 24.7 times in FY25.
A forward ratio cannot be compared perfectly with an annual historical average, but the figures still make one point clear. CBA is trading well above the valuation investors have generally paid over the past decade.
Consider the earnings yield
The earnings yield is simply the inverse of the price-to-earnings ratio.
Based on the consensus forecasts, CBA has an earnings yield of approximately 3.7% in FY26 and 3.8% in FY27.
This means each $100 invested at the current price is supported by less than $4 of forecast annual earnings.
That may be acceptable for a high-quality company capable of dependable growth, but it leaves less room for disappointment than a higher earnings yield would.
Check the dividend yield
CommSec forecasts dividends per share of $5.10 in FY26 and $5.15 in FY27.
At $176.07, those estimates produce forward dividend yields of approximately 2.9% in both years, before any value from franking credits.
CBA's average annual dividend yield over the decade to FY25 was around 4.5%.
The lower current yield reflects how strongly the share price has risen. Income investors are now paying considerably more for each dollar of expected dividends than they have historically.
Look at the price-to-book ratio
Book value measures the accounting value of a company's net assets attributable to shareholders.
CBA currently has book value of approximately $47.12 per share. Dividing its share price by that figure produces a price-to-book ratio of around 3.7 times.
Investors are therefore paying roughly $3.70 for every $1 of book value, which is high by historic and industry standards.
Banks capable of earning high returns on shareholder equity can deserve substantial premiums to book value. CBA's deposit franchise, customer relationships, technology, and reputation help explain why the market values it more highly than many competitors.
Still, a price-to-book ratio approaching four times shows investors are already expecting the bank to maintain exceptional performance.
Foolish takeaway
I think it is fair to concede that none of these measures makes CBA shares look cheap.
The price-to-earnings ratio and price-to-book ratio are high by historical standards, while the earnings and dividend yields are relatively modest.
However, valuation should also reflect business quality. CBA has a leading banking franchise, millions of customer relationships, strong digital engagement, and a history of producing reliable profits and dividends.
I would still buy CBA shares at around $176.07, particularly with a long holding period. But I would limit the size of the position because the current price already assumes plenty of future success.
