A director is buying up CBA shares. Should you?

Shares in S&P/ASX 200 Index (ASX: XJO) banking giant Commonwealth Bank of Australia (ASX: CBA) have caught the attention of one insider in recent weeks.

Independent director Julie Galbo bolstered her stake in the national institution last Tuesday, indirectly snapping up 130 shares for $96.90 apiece. That equals a total investment of nearly $12,600.

Does that mean the CBA share price – currently trading at $96.01 – is cheap? Well, that depends on who you ask.

Are CBA shares a buy right now?

The CBA share price has tumbled 5% over the last 30 days to trade near its lowest point since October right now. And some brokers appear to think the banking major is trading at a decent price.

Morgans, for one, tipped the stock as one of its best ideas earlier this month. It has a hold rating and a $96.11 price target on the bank share, my Fool colleague James reports.

However, as the broker pointed out, CBA’s valuation is notably steep compared to its peers right now.

The biggest of the big four currently offers a price-to-earnings (P/E) ratio of 16.75 and a price-to-book (P/B) ratio of 2.24, according to CommSec data.

Not to mention, CBA’s dividend yield – 4.4% at the time of writing – is lower than nearly all its ASX 200 bank peers.

But that hasn’t deterred either Morgans or Fairmont Equities founder and managing director Michael Gable. The expert also has a hold rating on CBA shares, saying as per The Bull:

Although CBA is the most expensive bank, we believe the price premium is justified because of its quality. Over the longer term, it outperforms the other major banks.

Not everyone is so bullish, however. Goldman Sachs has a sell rating and a $90.39 price target on CBA shares, representing a potential 5.8% downside.

The broker said the bank’s latest earnings, released last month, signalled its net interest margin (NIM) has peaked, making its valuation hard to support.

The post A director is buying up CBA shares. Should you? appeared first on The Motley Fool Australia.

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More reading

• ASX 200 bank shares lift despite Deutsche Bank stock tumble
• Should ASX 200 banks pay more for this implicit government backstop?
• How to make $500 of monthly income from CBA shares
• ASX big four bank shares close the day ahead as financial fears linger
• Goldman ‘remains confident in the health’ of ASX 200 bank shares and names its top pick

Motley Fool contributor Brooke Cooper has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Goldman Sachs Group. 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 Scott Phillips.

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