The Commonwealth Bank of Australia (ASX: CBA) share price is trading flat on Thursday.
Which isn’t a bad outcome considering the S&P/ASX 200 Index (ASX: XJO) is down 0.25% at the time of writing.
This means the CBA share price remains up almost 27% since the start of the year at $106.09.
Is the CBA share price good value?
One leading broker that still sees a lot of value in the CBA share price is Bell Potter.
According to a note from last week, the broker has retained its buy rating and $118.00 price target on the bank’s shares.
Based on the current CBA share price, this suggests there’s still potential upside of 11.2% for its shares. And if you include the $4.06 per share fully franked dividend the broker is forecasting in FY 2022, the potential return stretches to 15%.
What did the broker say?
Bell Potter notes that CBA will soon be releasing its first quarter update and is expecting a solid result.
It commented: “Net interest income is expected to be up by around 3%. This is based on higher overall banking volumes (back to the traditional business of mainly mortgage and retail consumer loans) that more than offset a fall in NIM of around 3bp (to 2.01%). The main drivers are thus home loans [+4% for Retail Banking Services (RBS), +3% for Business Bank/Institutional Banking and Markets (BB/IBM)] and other loans (+4% for RBS although BB/IBM was negative).”
Overall, this is expected to lead to the bank reported an unaudited cash NPAT of ~$2.36 billion for the quarter.
Valuation
Bell Potter also explained why it thinks the CBA share price is good value at the current level.
It uses a combination of earnings multiples and a sum of the parts (SOTP) valuation to come up with its price target.
The broker said: “We have, however, moved the prospective (FY22) PE multiples around (and thus Sum-of-Parts) to better capture the various segments: RBS 17.0x; BB/IB&M 18.0x; and New Zealand 17.0x. The composite valuation is thus $117.22, being an equal measure of: DCF $186.5bn; dividend yield $197.9bn; ROE $198.2bn; and Sum-of-Parts $171.2bn. There is also surplus capital of $11.6bn to top it off. The price target is the same as before, being $118.00 per share, and likewise the Buy rating based on a 12-month TSR of greater than 15%.”
The post Is the CBA (ASX:CBA) share price a bargain buy? appeared first on The Motley Fool Australia.
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More reading
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- Is the CBA (ASX:CBA) share price a great deal right now?
Motley Fool contributor James Mickleboro 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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