As of July 18, 2023, Citizens Financial Group Inc (CFG, Financial) is trading at $29.11, marking a 3.67% change for the day. With a market cap of $14.1 billion and sales reaching $8.5 billion, the company's key financial metrics are noteworthy. However, the GF Value for Citizens Financial Group stands at $43.99, suggesting that the stock is significantly undervalued.
Citizens Financial Group is a prominent bank holding company based in Providence, Rhode Island. The company operates through two principal business segments: consumer banking and commercial banking. Offering a variety of retail and commercial products, including capital markets and wealth options, Citizens Financial Group operates over 1,000 branches in 14 states, primarily in the Northeast. The company boasts over $220 billion in total assets.
Understanding the GF Value
The GF Value is a proprietary indicator of a stock's intrinsic worth, calculated by GuruFocus based on historical trading multiples, an adjustment factor based on past performance and growth, and future business performance estimates. If a stock's price significantly exceeds the GF Value Line, it is considered overvalued, and its future return is likely to be poor. Conversely, if the price is significantly below the GF Value Line, the stock is undervalued, and its future return will likely be higher.
With a current price of $29.11 per share, Citizens Financial Group appears to be significantly undervalued according to the GF Value. This suggests that the long-term return of its stock is likely to be much higher than its business growth.
Financial Strength and Profitability
Companies with poor financial strength pose a high risk of permanent capital loss for investors. It's crucial to review a company’s financial strength, including its cash-to-debt ratio, before deciding to purchase shares. Citizens Financial Group's cash-to-debt ratio of 0.42 ranks lower than 75.61% of companies in the banking industry, indicating poor financial strength.
Profitability is another vital factor. Citizens Financial Group has been profitable nine times over the past ten years. Despite this, its operating margin is 0%, ranking lower than most companies in the banking industry. This indicates fair profitability.
Growth and ROIC vs WACC
Company growth is closely tied to long-term stock performance. Citizens Financial Group's 3-year average annual revenue growth is 5.4%, ranking lower than 54.95% of companies in the banking industry. The 3-year average EBITDA growth rate is 0%, which also ranks lower than most banking industry peers.
Another way to assess a company's profitability is by comparing its return on invested capital (ROIC) and the weighted cost of capital (WACC). For the past 12 months, Citizens Financial Group’s ROIC is 0, and its WACC is 7.8. Ideally, the ROIC should be higher than the WACC.
Conclusion
In conclusion, Citizens Financial Group appears to be significantly undervalued. Despite its poor financial condition, the company demonstrates fair profitability. However, its growth ranks lower than most companies in the banking industry. To learn more about Citizens Financial Group's stock, you can check out its 30-Year Financials here.
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