Core Viewpoint - The Commonwealth Bank of Australia (CBA) share price is under scrutiny as investors attempt to establish a valuation for the company amidst fluctuating market conditions [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 [3][4]. - CBA's current share price is $153.36, with earnings per share of $5.63, resulting in a PE ratio of 27.2x, which is significantly higher than the banking sector average of 18x [5]. - A sector-adjusted PE valuation for CBA, based on the average PE ratio, yields a valuation of $102.32 per share [5]. Dividend Discount Model (DDM) - The Dividend Discount Model (DDM) is a more comprehensive approach for valuing banks, relying on recent or forecasted dividends and a risk rate [6][7]. - The formula used for DDM valuation is Share price = full-year dividend / (risk rate – dividend growth rate) [8]. - Using a blended growth rate and risk rate between 6% and 11%, the DDM valuation for CBA shares ranges from $98.33 to $100.66, depending on the dividend payment considered [10]. Adjusted Valuation - 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]. - Different growth and risk rate scenarios yield a range of valuations, with a 2% growth rate and a 6% risk rate suggesting a valuation of $119.00 [12]. Additional Considerations - Investors should assess net interest margins and regulatory impacts on non-interest income as part of their analysis [13]. - The management team's effectiveness and company culture are also critical factors in long-term investment decisions [13].