Citizens Financial Group has been treading water for the past six months, recording a small loss of 4.3% while holding steady at $41.71.
Is now the time to buy Citizens Financial Group, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Is Citizens Financial Group Not Exciting?
We don't have much confidence in Citizens Financial Group. Here are three reasons why we avoid CFG and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
Net interest income commands greater market attention due to its reliability and consistency, whereas non-interest income is often seen as lower-quality revenue that lacks the same dependable characteristics.
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.
2. EPS Trending Down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
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.
3. Substandard TBVPS Growth Indicates Limited Asset Expansion
We consider tangible book value per share (TBVPS) the most important metric to track for banks. TBVPS represents the real, liquid net worth per share of a bank, excluding intangible assets that have debatable value upon liquidation.
Disappointingly for investors, Citizens Financial Group’s TBVPS grew at a tepid 7.4% annual clip over the last two years.
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 $41.71 per share). While this valuation is optically cheap, the potential downside is big given its shaky fundamentals. We're fairly confident there are better stocks to buy right now. We’d suggest looking at one of our all-time favorite software stocks.
Stocks We Would Buy Instead of Citizens Financial Group
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