By contrast, he said that between 1997 and 2019, CBA shares traded on a price to earnings multiple between 10 and 16.5 times.
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“I’m a fundamental sell-side analyst. We need to have valuation as an anchor for our recommendations, and at 28 times earnings, I think investors should be underweight the stock,” Wiles said.
Citi analyst Thomas Strong, meanwhile, highlighted the risk of investors being “wrong-footed” if there is a change in how investors look at the two biggest sectors of the ASX: banks and miners.
He said banks and miners constitute about 45 per cent of the Australian market and banks had outperformed over the past 18 months, but earnings expectations were now being downgraded and valuations looked full.
MST Marquee analyst Brian Johnson there had long been debate over whether CBA was overvalued, but the crucial question was how it looked compared with other big ASX stocks such as BHP, Fortescue, CSL or Woolworths.
Johnson, who has a “hold” rating on CBA shares, said that superannuation funds – which will have higher inflows from July as mandatory super contribution rates increase – needed to invest somewhere. While CBA’s outlook was relatively solid, he said it would attract investors.
AMP chief economist Shane Oliver said the heavy role of banks and miners in the ASX meant investors were more exposed to the fortunes of these sectors. But he said superannuation funds had reduced these risks by investing more of their portfolios overseas.
“It does pose a risk, but for most Australians I think it’s handled by having a well-diversified portfolio, including by having global shares.”
Meanwhile, broking firm Martin Currie told the corporate watchdog in a submission that CBA shares traded less frequently than other big companies, given its size. It said that if index weights were less concentrated it could free up capital for smaller companies and encourage more firms to list.
