The CBA share price has been a popular investment choice for ASX investors, especially since the COVID lows. This article explores the valuation of bank shares, focusing on the CBA example, using the dividend yield and PE ratio. It highlights the importance of considering the sector average PE ratio and the impact of fully franked dividends on the share price. The article also introduces the dividend discount model (DDM) as a valuation tool, demonstrating how it can be used to estimate the CBA share price based on expected dividend growth and risk rates. The analysis provides a comprehensive overview of the valuation process, emphasizing the need for qualitative research beyond numerical models in investment decisions.
