Source: Wikimedia Commons
Over the past 12 months, shares of U.S. Bancorp (USB 0.73%) have been walloped by both its peers on the KBW Bank Index and the broader market's S&P 500. Its total return of 16% underperforms KBW by roughly 22 percentage points and the S&P by 5 percentage points. In light of this lackluster performance, should current and prospective investors expect its shares to rebound or continue to lag?
The answer to this question is far from clear when you examine the collective insight of banking analysts. The median target price of the 28 analysts surveyed by Standard & Poor's Capital IQ is $39 a share, with a high estimate of $43 and a low of $33.50. As of the time of writing, U.S. Bancorp actually trades for $37.30 per share. Consequently, if the analysts are to be believed, which is admittedly a big "if," then there's an anticipated upside of 4.6%.
|
Metric |
U.S. Bancorp |
KBW Bank Index |
|---|---|---|
|
Price to Tangible Book Value |
2.77 |
1.82 |
|
Price to Book Value |
1.97 |
1.25 |
|
Price to Earnings |
12.70 |
15.21 |
Source Standard & Poor's Capital IQ.
The modest upside is largely a result of U.S. Bancorp's current valuation. Thanks to its reputation for conservative banking and a fortress-like balance sheet, its shares trade for 2.77 times tangible book value and 1.97 times book value. These are 52% and 58%, respectively, above the average of the 24 banks in the KBW bank index, leaving seemingly little room for outperformance relative to its peers.
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 U.S. Bancorp. What it shows us instead is that a deeper look at the massive regional lender's shares may very well be in order given its well-defended position in the industry and the, at least at this stage in the analysis, comparatively underwhelming opportunity for share price appreciation.
