Are CBA shares worth considering in October?

Core Viewpoint - The Commonwealth Bank of Australia (CBA) share price is under scrutiny as investors attempt to establish a rough valuation of the company, with various methods available for assessing bank shares [1][2]. Valuation Methods - The Price-to-Earnings (PE) ratio is a common method for valuing bank shares, comparing the share price to earnings per share (EPS) [3][4]. - CBA's current share price is $168.09, with an EPS of $5.63, resulting in a PE ratio of 29.9x, which is higher than the banking sector average of 20x [5]. - A sector-adjusted PE valuation for CBA, using the sector average PE, yields a valuation of $111.52 [5]. Dividend Valuation - The Dividend Discount Model (DDM) is a more robust valuation method for banks, which considers the most recent dividends and assumes consistent growth [6][7]. - Using last year's dividend payment of $4.65 and various growth and risk rates, the average valuation of CBA shares is calculated at $98.33, with an adjusted dividend leading to a valuation of $100.66 [10]. - Considering fully franked dividends, the valuation based on a gross dividend payment of $6.80 results in a share price valuation of $143.80 [11]. Growth and Risk Analysis - Different growth rates (2% to 4%) and risk rates (6% to 11%) yield a range of valuations for CBA shares, with the highest valuation reaching $238.00 at a 4% growth rate and 6% risk rate [12]. - The analysis emphasizes the importance of understanding net interest margins and regulatory impacts on non-interest income for a comprehensive evaluation of bank shares [13]. Management and Culture Assessment - Evaluating the management team and company culture is crucial for long-term investment decisions, with CBA's culture noted as not being perfect but still a significant factor in analysis [13].