About nine months ago, Citigroup's (NYSE: C) share price managed to crack through $5 per share, but it wasn't able to hold that lofty level. Recently, the stock broke the $5 mark again and then pulled back after a weak earnings report. Can Citi reclaim a five-handle and keep going?
Fools know that share price by itself doesn't mean much, but $5 per share is often a minimum share price that many institutional investors and mutual funds will consider -- as the facts bear out:
|
Bank |
Institutional and Mutual Fund Ownership |
|---|---|
| Citigroup |
39% |
| Bank of America (NYSE: BAC) |
64% |
| JPMorgan Chase (NYSE: JPM) |
75% |
| Wells Fargo (NYSE: WFC) |
77% |
* Source: Yahoo! Finance.
Institutions and mutual funds would have to go on quite a shopping spree for their Citi ownership levels to catch up with those of the other big banks.
But now we've seen two significant changes since Citi's last foray with 5 bucks. First, the U.S. Treasury completed selling its stake in the bank, and those sales had kept the brakes on any price increases. Second, the former king of big, bailed-out banks has now put together a string of four consecutive profitable quarters.
To get a handle on how Citi compares with its peers, let’s look at some numbers.
|
Bank |
PE |
Price-to-Tangible Book Ratio |
Tier 1 Capital Ratio |
|---|---|---|---|
| Citigroup |
10.43 |
1.07 |
12.5% |
| Bank of America |
9.82 |
1.15 |
11.2% |
| JP Morgan Chase |
9.69 |
1.52 |
11.9% |
| Wells Fargo |
11.47 |
1.81 |
11.3% |
*Sources: Yahoo! Finance, The Motley Fool, Capital IQ (a division of Standard & Poor's), and recent quarterly earnings reports.
Citi's valuation stacks up well against the other big U.S. banks. With the Treasury share overhang of out of the way and a string of quarterly reports showing earnings on the books, the company deserves to trade at similar multiples to peers. Having the strongest capital ratio in the group even makes a dividend a possibility.
Cracking the $5 barrier and falling back may look like a repeat from last year, but this time Citi has demonstrated that it's turned things around. The numbers in the most recent earnings report missed the mark, but my Foolish colleague Morgan Housel points out that there was some good news in the report. With its performance on the right track and institutions still underweight on the stock, I don't expect Citigroup to stay below $5 for much longer.
What's your opinion? Is Citi at $5 cheap or expensive?
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