Citizens Financial Group has been treading water for the past six months, recording a small return of 1.4% while holding steady at $44.25.
Is now the time to buy Citizens Financial Group, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Citizens Financial Group Not Exciting?
We're sitting this one out for now. Here are three reasons why you should be careful with CFG and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
While banks generate revenue from multiple sources, investors view net interest income as the cornerstone - its predictable, recurring characteristics stand in sharp contrast to the volatility of non-interest income.
Citizens Financial Group’s net interest income has grown at a 5.3% annualized rate over the last four years, worse than the broader bank industry.
Citizens Financial Group Quarterly Net Interest Income 2. EPS Trending Down
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Sadly for Citizens Financial Group, its EPS declined by 3.6% annually over the last five years while its revenue grew by 3.5%. This tells us the company became less profitable on a per-share basis as it expanded.
Citizens Financial Group Trailing 12-Month EPS (Non-GAAP) 3. Substandard TBVPS Growth Indicates Limited Asset Expansion
In the banking industry, tangible book value per share (TBVPS) provides the clearest picture of shareholder value, as it focuses on concrete assets while excluding intangible items that may not hold value during challenging times.
To the detriment of investors, Citizens Financial Group’s TBVPS grew at a tepid 7.4% annual clip over the last two years.
Citizens Financial Group Quarterly Tangible Book Value per Share Final Judgment
Citizens Financial Group isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 0.8× forward P/B (or $44.25 per share). Beauty is in the eye of the beholder, but our analysis shows the upside isn’t great compared to the potential downside. We're fairly confident there are better stocks to buy right now. We’d suggest looking at one of Charlie Munger’s all-time favorite businesses.
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