Is it a good time to buy Commonwealth Bank (ASX: CBA) shares?

Commonwealth Bank of Australia (ASX: CBA) shares have been on a handy run of late. Shares in Australia’s biggest bank are up 18.8% year-to-date and 37.3% in the last year.

Investment decision-making is a very individual process and whether or not to buy will vary greatly depending on financial position, investment horizon and investment strategy.

However, the bank’s shares are trading just shy of $100 per share and aren’t far off an all-time high. So, is it a good time to buy CBA shares?

When is a good time to buy CBA shares?

Some investors may be wary of purchasing CBA shares so close to an all-time high. However, an all-time high isn’t a bad thing in and of itself.

For instance, in order for a share price to continue climbing over time, you’d expect it to be at an all-time high at several points. That means that record highs, or even 52-week highs, aren’t something to be afraid of.

What might help in assessing CBA shares right now is the relative value that they offer versus peers. A comparable peer group for CBA could be its fellow Big Four banks.

CBA shares currently trade at a price to earnings (P/E) ratio of 22.1 times earnings with a 2.5% dividend yield. Let’s see how that stacks up against Australia and New Zealand Banking Group Ltd (ASX: ANZ), National Australia Bank Ltd (ASX: NAB) and Westpac Banking Corp (ASX: WBC).

Based solely on the P/E ratio, ANZ is the best value at 16.8x earnings compared to NAB (19.9x) and Westpac (21.1x). For those hunting for income, ANZ also leads the pack with a 3.8% dividend yield. CBA (2.5%) is notably the lowest with NAB (3.5%) and Westpac (3.6%) both trading higher.

Based purely on these metrics alone, it does look like CBA shares are trading at a slight premium to their peers. CBA’s 22.1x P/E ratio is above the group average of 20.0x with a lower dividend yield. However, investing isn’t as easy as buying whatever is cheapest based on a couple of easy numbers.

There are many reasons why a share may trade at a premium to its peers. For instance, a large price drop would be bad for total returns but if the earnings and dividends estimates remained unchanged, the relative value would look more attractive.

P/E ratios and dividend yields could also be reflecting demand for greater governance, a stronger capital position, a better balance sheet or even a preferred strategy.

Foolish takeaway

Whether now is a good time to buy CBA shares will depend on the individual.

There’s no doubt they’ve performed well in the last year or so and aren’t far away from an all-time high. If I were considering buying, I’d keep a close eye on CBA’s full-year results on 11 August.

The post Is it a good time to buy Commonwealth Bank (ASX: CBA) shares? appeared first on The Motley Fool Australia.

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Motley Fool contributor Ken Hall has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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