Does Citigroup's Stock Deserve a Deeper Look?
Over the past 12 months, shares of Citigroup have handily outperformed both its peers on the KBW Bank Index and the broader market's S&P 500. Their total return of 68% beats the former by roughly 30 percentage points and the latter by 48 percentage points. But while this performance is outstanding, it forces current and prospective investors to question whether the nation's third largest bank by assets can keep it up going forward.
According to the collective insight of banking analysts, the answer to this question is yes. The median target price of the 25 analysts surveyed by S&P Capital IQ is $61 a share, with a high estimate of $68.50 and a low of $36. As of the time of writing, Citigroup actually trades for approximately $50 per share. Consequently, if the analysts are to be believed, which is admittedly a big "if," then there's an anticipated upside of 22%.
KBW Bank Index
Price-to-Tangible Book Value
Source S&P Capital IQ.
In this case, Citigroup's valuation lends credibility to the potential for future appreciation. At present, shares of the bank trade for 0.94 times tangible book value and 0.79 times book value. Those figures are 49% and 37% less, respectively, than the 24-member KBW Bank Index, of which Citigroup is a member. The one exception in this regard is its price-to-earnings ratio of 15.7, which is roughly 3% higher than its peers though 12% below that of the average stock on the S&P 500.
At the end of the day, this is a quick and rudimentary analysis that shouldn't be relied upon singularly when deciding whether to buy or sell shares of Citigroup. What it shows us instead is that a deeper look at the megabank's shares may very well be in order, given the potential for future gains.
Bargains of a lifetime are still available in bank stocks, but it's critical to understand what makes the best banks tick. The Motley Fool's new report "Finding the Next Bank Stock Home Run" demystifies the perils of investing in banks and reveals how savvy investors can win. It's completely free -- click here to get started.
The article Does Citigroup's Stock Deserve a Deeper Look? originally appeared on Fool.com.John Maxfield has no position in any stocks mentioned. The Motley Fool owns shares of Citigroup. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
Copyright © 1995 - 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.