Why Commonwealth Bank of Australia (ASX:CBA) Could Be A Buy
Commonwealth Bank of Australia (ASX:CBA) received a lot of attention from a substantial price movement on the ASX in the over the last few months, increasing to A$84.54 at one point, and dropping to the lows of A$73.24. This high level of volatility gives investors the opportunity to enter into the stock, and potentially buy at an artificially low price. A question to answer is whether CBA’s current trading price of A$78.99 reflective of the actual value of the large-cap? Or is it currently undervalued, providing us with the opportunity to buy? Let’s take a look at CBA’s outlook and value based on the most recent financial data to see if there are any catalysts for a price change. Check out our latest analysis for Commonwealth Bank of Australia
Is CBA still cheap?
According to my valuation model, CBA seems to be fairly priced at around 8% below my intrinsic value, which means if you buy CBA today, you’d be paying a fair price for it. And if you believe that CBA is really worth A$85.82, then there’s not much of an upside to gain from mispricing. Furthermore, it seems like CBA’s share price is quite stable, which means there may be less chances to buy low in the future now that it’s fairly valued. This is because CBA’s stock is less volatile than the wider market given its low beta.
What kind of growth will CBA generate?
Future outlook is an important aspect when you’re looking at buying a stock, especially if you are an investor looking for growth in your portfolio. Buying a great company with a robust outlook at a cheap price is always a good investment, so let’s also take a look at CBA future expectations. CBA’s earnings growth are expected to be in the teens in the upcoming years, indicating a solid future ahead. This should lead to robust cash flows, feeding into a higher share value.
What this means for you:
Are you a shareholder? CBA’s optimistic future growth appears to have been factored into the current share price, with shares trading around its fair value. However, there are also other important factors which we haven’t considered today, such as the financial strength of the company. Have these factors changed since the last time you looked at CBA? Will you have enough conviction to buy should the price fluctuates below the true value?
Are you a potential investor? If you’ve been keeping tabs on CBA, now may not be the most advantageous time to buy, given it is trading around its fair value. However, the optimistic prospect is encouraging for CBA, which means it’s worth diving deeper into other factors such as the strength of its balance sheet, in order to take advantage of the next price drop.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Commonwealth Bank of Australia. You can find everything you need to know about CBA in the latest infographic research report. If you are no longer interested in Commonwealth Bank of Australia, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.
