Over the past 12 months, shares of Citigroup (C +2.29%) 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%.
|
Metric |
Citigroup |
KBW Bank Index |
|---|---|---|
|
Price-to-Tangible Book Value |
0.94 |
1.82 |
|
Price-to-Book Value |
0.79 |
1.25 |
|
Price-to-Earnings Ratio |
15.70 |
15.21 |
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.
