Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Citizens Financial Group, Inc. (CFG - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Citizens Financial has a trailing twelve months PE ratio of 22.53, as you can see in the chart below:
This level compares unfavorably with the market at large, as the PE for the S&P 500 stands at about 19.86. If we focus on the long-term PE trend, Citizens Financial’s current PE level puts it close to its highs over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares unfavorably with the Zacks classified Finance-Saving & Loan industry’s trailing twelve months PE ratio, which stands at 21.15. This indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Citizens Financial has a forward PE ratio (price relative to this year’s earnings) of just 16.55, so it is fair to say that a slightly more value-oriented path may be ahead for this stock in the near term.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Citizens Financial’s P/CF ratio of 12.58 is lower than the Zacks classified Finance-Saving & Loan industry average of 17.44, which indicates that the stock is undervalued in this respect.
Broad Value Outlook
In aggregate, Citizens Financial currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Citizens Financial a good choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Citizens Financial is just 0.85, a level that is lower than the industry average of 1.97. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, CFG is a good choice on the value front from some angles, despite its current high valuation.
What About the Stock Overall?
Though Citizens Financial might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘D’ and a Momentum score of ‘C’. This gives CFG a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been somewhat positive. The current quarter has seen four upward revisions in the past sixty days compared to none downward, while the full year estimate has seen three up and one down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has remained stable over the past two months, while the full year estimate has inched higher by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Citizens Financial Group, Inc. Price and Consensus
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From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
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Value investing is easily one of the most popular ways to find great stocks in any market environment. After all, who wouldn’t want to find stocks that are either flying under the radar and are compelling buys, or offer up tantalizing discounts when compared to fair value?
One way to find these companies is by looking at several key metrics and financial ratios, many of which are crucial in the value stock selection process. Let’s put Citizens Financial Group, Inc. (CFG - Free Report) stock into this equation and find out if it is a good choice for value-oriented investors right now, or if investors subscribing to this methodology should look elsewhere for top picks:
PE Ratio
A key metric that value investors always look at is the Price to Earnings Ratio, or PE for short. This shows us how much investors are willing to pay for each dollar of earnings in a given stock, and is easily one of the most popular financial ratios in the world. The best use of the PE ratio is to compare the stock’s current PE ratio with: a) where this ratio has been in the past; b) how it compares to the average for the industry/sector; and c) how it compares to the market as a whole.
On this front, Citizens Financial has a trailing twelve months PE ratio of 22.53, as you can see in the chart below:
This level compares unfavorably with the market at large, as the PE for the S&P 500 stands at about 19.86. If we focus on the long-term PE trend, Citizens Financial’s current PE level puts it close to its highs over the past five years, with the number having risen rapidly over the past few months.
Further, the stock’s PE also compares unfavorably with the Zacks classified Finance-Saving & Loan industry’s trailing twelve months PE ratio, which stands at 21.15. This indicates that the stock is relatively overvalued right now, compared to its peers.
We should also point out that Citizens Financial has a forward PE ratio (price relative to this year’s earnings) of just 16.55, so it is fair to say that a slightly more value-oriented path may be ahead for this stock in the near term.
P/CF Ratio
An often overlooked ratio that can still be a great indicator of value is the price/cash flow metric. This ratio doesn’t take amortization and depreciation into account, so can give a more accurate picture of the financial health in a business. This is a preferred metric to some valuation investors because cash flows are (a) generally less prone to manipulation by the company’s management and (b) are less affected by variation in accounting policies between different companies.
The ratio is generally applied to find out whether a company’s stock is overpriced or underpriced with reference to its cash flows generation potential compared with its competitors. However, it is not commonly used for cross-industry comparison, as the average price to cash flow ratio varies from industry to industry.
In this case, Citizens Financial’s P/CF ratio of 12.58 is lower than the Zacks classified Finance-Saving & Loan industry average of 17.44, which indicates that the stock is undervalued in this respect.
Broad Value Outlook
In aggregate, Citizens Financial currently has a Zacks Value Style Score of ‘B’, putting it into the top 40% of all stocks we cover from this look. This makes Citizens Financial a good choice for value investors, and some of its other key metrics make this pretty clear too.
For example, the PEG ratio for Citizens Financial is just 0.85, a level that is lower than the industry average of 1.97. The PEG ratio is a modified PE ratio that takes into account the stock’s earnings growth rate. Clearly, CFG is a good choice on the value front from some angles, despite its current high valuation.
What About the Stock Overall?
Though Citizens Financial might be a good choice for value investors, there are plenty of other factors to consider before investing in this name. In particular, it is worth noting that the company has a Growth grade of ‘D’ and a Momentum score of ‘C’. This gives CFG a Zacks VGM score—or its overarching fundamental grade—of ‘C’. (You can read more about the Zacks Style Scores here >>)
Meanwhile, the company’s recent earnings estimates have been somewhat positive. The current quarter has seen four upward revisions in the past sixty days compared to none downward, while the full year estimate has seen three up and one down in the same time period.
This has had just a small impact on the consensus estimate though as the current quarter consensus estimate has remained stable over the past two months, while the full year estimate has inched higher by 0.5%. You can see the consensus estimate trend and recent price action for the stock in the chart below:
Citizens Financial Group, Inc. Price and Consensus
Zacks Names "Single Best Pick to Double"
From thousands of stocks, 5 Zacks experts each have chosen their favorite to skyrocket +100% or more in months to come. From those 5, Director of Research Sheraz Mian hand-picks one to have the most explosive upside of all.
It’s a little-known chemical company that’s up 65% over last year, yet still dirt cheap. With unrelenting demand, soaring 2022 earnings estimates, and $1.5 billion for repurchasing shares, retail investors could jump in at any time.
This company could rival or surpass other recent Zacks’ Stocks Set to Double like Boston Beer Company which shot up +143.0% in little more than 9 months and NVIDIA which boomed +175.9% in one year.
Free: See Our Top Stock and 4 Runners Up >>
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