Group 1: Company Overview - Commonwealth Bank of Australia (CBA) share price is under scrutiny as ASX investors attempt to establish a rough valuation of the company [1][2] - CBA's share price currently stands at $167.32, with earnings per share (EPS) reported at $5.63 for FY24, resulting in a price-to-earnings (PE) ratio of 29.7x, compared to the banking sector average of 19x [5] Group 2: Valuation Methods - The PE ratio can be utilized in three ways: intuitive assessment, comparison with peers like MQG or sector averages, and calculating a valuation based on EPS multiplied by an appropriate PE multiple [3][4] - A Dividend Discount Model (DDM) is a more robust method for valuing banks, using the most recent full-year dividends and assuming consistent or growing dividends [6][7] - The DDM formula is Share price = full-year dividend / (risk rate – dividend growth rate), and it is advisable to calculate with various growth and risk assumptions to derive an average valuation [8] Group 3: DDM Valuation Results - Using a blended growth and risk rate between 6% and 11%, the DDM yields a valuation of CBA shares at $98.33, which increases to $100.66 with an adjusted dividend payment of $4.76 [10] - Valuing based on a gross dividend payment of $6.80 results in a share price valuation of $143.80 [11] Group 4: Growth and Risk Analysis - Different growth rates and risk rates yield various valuations, with a 2% growth rate and a 6% risk rate resulting in a valuation of $119.00, while an 11% risk rate drops the valuation to $52.89 [12] Group 5: Additional Considerations - Further research is necessary to assess whether investing in CBA is more beneficial than a low-cost, dividend-paying ETF like Vanguard Australian Shares Index ETF [12] - Important questions include the sustainability of net interest margins and the management of regulatory challenges in pursuit of non-interest income [13] - Company culture is also a significant factor in long-term investment analysis, with CBA's culture not rated as perfect [13]