On valuation grounds, my view is that our Big Four banks are all candidates for a ‘sell’ rating.  But they’re not the only popular stocks where analysts are warning of clear over-valuation and potential for share-price degradation. 

Stocks can often over-shoot in price, to a point where they are uniformly considered to be over-valued. At that point, there is certainly a case that they should be sold; and that – capital gains tax (CGT) considerations aside – if the investor likes the longer-term story, they can buy back in cheaper.

For most of this year, analysts have been loudly banging this particular drum about the big four banks, especially Commonwealh Bank, which has become, on some metrics, the most expensive bank stock in all developed markets. For many investors, given the highly favourable impact of franking credit rebates on low tax rates – the superannuation accumulation rate of 15% and the zero tax rate on super funds paying pensions – there may be good reasons for holding the bank stocks on dividend yield grounds, especially when the actual grossed-up yield an individual holder receives is determined, in their hands, on their individual average purchase price. But aside from income considerations, the Australian big four banks are, on valuation grounds, all candidates for a ‘sell’ rating.

Here’s the tale of the tape on the big four:

Commonwealth Bank (CBA, $172.84)

• Market capitalisation: $289.2 billion
• 1-year total performance: 30.4%
• 3-year total performance: 24.9% a year
• FY26 (June) estimated dividend yield: 2.9% fully franked (grossed-up, 4.1%)
• FY26 estimated price/earnings (P/E) ratio: 27.2 times earnings
• Analysts’ consensus price target: $116 (Stock Doctor, 13 analysts); $112.81 (FN Arena, six analysts)

Westpac (WBC, $38.98)

• Market capitalisation: $133.4 billion
• 1-year total performance: 36.2%
• 3-year total performance: 28.7% a year
• FY26 (September) estimated dividend yield: 4% fully franked (grossed-up, 5.7%)
• FY26 estimated price/earnings (P/E) ratio: 19 times earnings
• Analysts’ consensus price target: $30.00 (Stock Doctor, 12 analysts); $30.28 (FN Arena, six analysts)

National Australia Bank (NAB, $42.47)

• Market capitalisation: $129.7 billion
• 1-year total performance: 20.4%
• 3-year total performance: 17.6% a year
• FY26 (September) estimated dividend yield: 4.1% fully franked (grossed-up, 5.8%)
• FY26 estimated price/earnings (P/E) ratio: 18.1 times earnings
• Analysts’ consensus price target: $34.50 (Stock Doctor, 13 analysts); $34.91 (FN Arena, six analysts)

ANZ Group (ANZ, $33.87)

• Market capitalisation: $100.6 billion
• 1-year total performance: 19.5%
• 3-year total performance: 21.3% a year
• FY26 (September) estimated dividend yield: 4.9%, partly franked at 70% (grossed-up, 6.4%)
• FY26 estimated price/earnings (P/E) ratio: 15 times earnings
• Analysts’ consensus price target: $29.50 (Stock Doctor, 13 analysts); $27.81 (FN Arena, six analysts)

4 more potential sells

But the big four banks are not the only popular stocks where analysts are warning of clear over-valuation, and the clear potential for share-price degradation. Here are four more such situations:

1. HUB 24 (HUB, $104.84)

Market capitalisation: $8.5 billion

1-year total performance: 104.9%

3-year total performance: 62.3% a year

FY26 estimated dividend yield: 0.7% fully franked (grossed-up, 0.9%)

FY26 estimated price/earnings (P/E) ratio: 72.3 times earnings

Analysts’ consensus price target: $87.40 (Stock Doctor, 16 analysts)

Financial technology company HUB24 has been a major success since it listed on the Australian Securities Exchange (ASX) in 2007. The flagship HUB24 investment and superannuation platform gives advisers and clients a wide range of investment options, including managed portfolio options and enhanced transaction and reporting functionality. HUBconnect provides data and technology for stockbrokers, licensees and advisers.

The other businesses are:

• Class is a cloud-based wealth accounting and compliance software offering, particularly for self-managed super fund (SMSF) administration.
• NowInfinity is a corporate compliance and documentation technology provider for SMSFs.
• PARS (Portfolio Administration and Reporting Service) enables financial professionals and their clients to have a ‘whole of wealth’ view of their assets.
• myprosperity provides client portals for financial professionals: its client portal is used by 520 accounting and financial advisory firms, as well as about 93,000 households.

HUB24 now has $136.4 billion in funds under advice (FUA), a figure that has grown at a compound annual growth rate (CAGR) of 24% over the last four years. In the same period, the group’s revenue has grown at a CAGR of 38%, while the number of advisers using HUB24 has grown at a CAGR of 14%, to around 5,100: one-third of Australian financial advisers use HUB24.

HUB is growing its adviser base and increasing FUA per adviser. Its scale, distribution reach, and track record of execution provide an excellent solid foundation for further growth. It is a highly profitable company – but the share price reflects all of that, and more.

2. Cochlear (COH, $301.91)

Market capitalisation: $19.7 billion

1-year total performance: 0.8%

3-year total performance: 12.6% a year

FY26 estimated dividend yield: 1.6%, 82.5% franked (grossed-up, 2.2%)

FY26 estimated price/earnings (P/E) ratio: 72.3 times earnings

Analysts’ consensus price target: $297.72 (Stock Doctor, 16 analysts)

Cochlear Limited is one of Australia’s great scientific success stories. It is a global leader in providing implantable hearing solutions, primarily cochlear implants, which help individuals with severe to profound hearing loss. The company was founded in 1981 due to pioneering work by Professor Graeme Clark, who developed the first multi-channel cochlear implant. This innovation was driven by a desire to help the deaf experience the sensation of sound, leading to the commercial development of the cochlear implant.

Cochlear has now provided more than 750,000 implantable devices to people with impaired hearing: it sells its products in more than180 countries, with employees based in more than 50 countries. Cochlear’s global market share in hearing implants is more than 60%.

The company invests about 12% of its sales revenue each year in research and development (R&D), with more than $3 billion invested since listing, and it has a portfolio of more than 2,300 patent and patent applications worldwide. Cochlear has six manufacturing locations around the world, three in Australia, one in Malaysia, one in China and one in Sweden.

This year, Cochlear is rolling out around the world the Nucleus Nexa System, which the company says is the world’s first and only‘smart’ cochlear implant, which features upgradeable firmware, offering users ongoing access to new innovations and improved hearing performance. The Nucleus Nexa System was launched in Europe and Asia Pacific in mid-June, with US Food & Drug Administration (FDA) approval achieved in early July.

FY25 results delivered a steady performance, in the wake of a June guidance reset. Sales revenue came in at $2.36 billion, up 4% and consistent with market expectations following the downgrade, while underlying net profit was up 1% at $392 million – at the low end of the revised $390 million–$400 million range. Despite the headwinds, gross margins held up at 75%. Looking to FY26, Cochlear has guided for an 11%–17% lift in underlying net profit.

It’s a great story — but analysts think this stock is on the way down.

3. Fortescue, (FMG, $19.50)

Market capitalisation: $59.9 billion

1-year total performance: 15.6%

3-year total performance: 10.5% a year

FY26 estimated dividend yield: 4.6% fully franked (grossed-up, 6.6%)

FY26 estimated price/earnings (P/E) ratio: 13.5 times earnings

Analysts’ consensus price target: $17.53 (Stock Doctor, 16 analysts)

Fortescue (FMG) is the world’s fourth-biggest iron ore exporter, mining, processing, and exporting iron ore to international markets, particularly China, which buys most of Fortescue’s ore. Fortescue’s main operations involve the mining and production of iron ore in Western Australia’s Pilbara region, supported by its integrated mining, rail, and port supply chain. The company operates major mining hubs, transporting its iron ore via a 760-kilometre railway to Port Hedland for export to global markets, primarily China’s steel industry. Fortescue also has a pipeline of exploration projects around the world focusing on copper, lithium and rare earths, in Gabon in Africa, Latin America and Australia.

Fortescue had a strong FY25, shipping 198.4 million tonnes of iron ore in the 12 months to June, up from 191.6 million the previous year. This beat the previous record of 192 million tonnes set in 2023. Fortescue said it could grow iron ore export volumes by up to 3 per cent in the year ahead. The surge in iron ore volumes in the past financial year also helped drive Fortescue’s unit costs lower by 1.3 per cent to $US17.99 a tonne – a cost result much better than the $US19.75 a tonne that Fortescue had warned investors to expect and was the first time since 2020 that costs were consecutively lower than the previous year.

Fortescue has become one of the biggest dividend payers of the major stocks over the last five years on the back of its large profit generation – many investors will want to keep the stock, for this, although brokers are forecasting significant dividend declines over the next few financial years, due to lower iron ore prices and lower profits.

And that’s the big problem –Fortescue’s financial performance lives and dies on iron ore prices, which have fallen recently due to weak demand from China’s property sector and steel industry. This price slump pressures Fortescue’s profit margins; the company’s earnings are particularly vulnerable because it produces a lower-grade product than global peers BHP, Rio Tinto and Vale (Brazil) produce, which attracts a discount compared to benchmark prices.

Prices depend on the Chinese economy, which is struggling as Beijing fails in its persistent attempts to simulate domestic consumption. The housing downturn continues, and lack of new investment is weighing on steel demand. Meanwhile, at the end of this year, production will start to flow from the enormous Simandou mine (owned by Rio Tinto and Chinese partners) in Guinea, which will substantially increase global supply, and put further pressure on iron ore prices. Fortescue is simply too vulnerable to this situation, analysts think.

4. Lynas Rare Earths, (LYC, $14.31)

Market capitalisation: $13.3 billion

1-year total performance: 107.4%

3-year total performance: 15.9% a year

FY26 estimated dividend yield: no dividend expected

FY26 estimated price/earnings (P/E) ratio: 51.5 times earnings

Analysts’ consensus price target: $10.23 (Stock Doctor, 14 analysts); $9.67 (FN Arena, six analysts)

Lynas is the undoubted flagship of the Australian rare earths sector, mining rare earths at its world-leading orebody at Mt. Weld in Western Australia, which began production in 2007. Mt Weld is one of the largest and highest-grade rare earths deposits in the world, and has plenty of potential to grow as further exploration is conducted: last year, Lynas announced it had almost doubled the Mt Weld mineral resource, from 55.4 million tonnes to 106.6-million tonnes, at a grade of 4.12% total rare earths oxide (TREO), while the ore reserve (that portion of the mineral resource that can be mined economically using today’s assumptions) lifted 63%, to 32 million tonnes at 6.44% TREO. Those numbers support a mine life of more than 20 years.

Lynas Rare Earths is in a great position in the global market, being the biggest non-Chinese producer of rare earths, at a time when it is becoming crucial for western economies to secure supplies. Rare earth concentrates produced at Mt Weld are shipped to Malaysia for separation into rare earth oxides (sold under long- term contracts), and a mixed heavy rare earth concentrate (shipped to China for processing). In November 2024, Lynas opened a processing plant in Kalgoorlie – Australia’s only downstream rare earths processing facility – which enables the company to shift rare earth carbonate production from Malaysia to Australia.

The company’s main product is a mix of the “light” rare earths neodymium-praseodymium (NdPr), sold mainly to Japanese customers, and used in high-tech magnets for batteries and wind turbines, consumer electronics, robotics, appliances and medical devices. There are “light” and “heavy” rare earths, based on their atomic number: the light rare earths are neodymium, praseodymium, lanthanum, cerium, and samarium. These elements typically comprise approximately 85%–90% of rare earth resources. The “heavy” rare earth metals make up the balance and are much less abundant.

Mt Weld also contains the heavies, and this year, Lynas has produced two new heavy rare earth (HRE) products for the first time, with a new process at its Lynas Malaysia metals processing plant producing separated dysprosium and terbium for the first time, complementing Lynas’ existing light rare earths product range. First production of dysprosium oxide at the Malaysian plant in May, with the plant confirming first production of terbium oxide in June. This makes the only commercial producer of separated heavy rare earths outside China.

Lynas is a terrific long-term story; but analysts reckon its price has moved way past fair value, and that anyone selling the stock could probably buy back in much cheaper, in the future.