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So far this year the financial sector has performed very well for investors. Most of the large financial institutions have beat estimates while returning money back to shareholders through dividends and share buybacks. Over the weekend, I decided I would look for a few names in the financial sector which could be attractive using the Price to Earnings, Price to Book, and a Price to Sales models. Below, I will share the results of a few simple regressions that I used to determine if Goldman Sachs Group Inc. (NYSE:GS), Wells Fargo & Company (NYSE:WFC) and Capital One Financial Corp. (NYSE:COF) are all undervalued relative to 20 similar financial institutions. All the data and ratios used for the regressions were sourced from a major data provider during the trading session on Friday. I provided the data I used as well as the predicted ratios and prices. Consider this a starting point for continued quantitative, qualitative and technical research.

Goldman Sachs Group Inc.

Price to Earnings Regression
Goldman Sachs Group Inc.GS
R-Square0.40
Current Price$155.25
Current P/E10.31
Growth Rate10.57
Beta1.23
Dividend Payout Ratio12.04
Predicted P/E12.43
Predicted Price$181.92
Price to Sales Regression
Goldman Sachs Group Inc.GS
R-Square0.70
Current Price$155.25
Current P/S1.85
Growth Rate10.57
Beta1.23
Dividend Payout Ratio12.04
Profit Margin10.66
Predicted P/S2.21
Predicted Price$186.17
Price to Book Regression
Goldman Sachs Group Inc.GS
R-Square0.40
Current Price$155.25
Current P/B1.07
Growth Rate10.57
Beta1.23
Dividend Payout Ratio12.04
Return on Equity10.66
Predicted P/B1.34
Predicted Price$193.95

Wells Fargo & Company

Price to Earnings Regression
Wells Fargo & CompanyWFC
R-Square0.40
Current Price$37.97
Current P/E11.20
Growth Rate11.08
Beta1.16
Dividend Payout Ratio25.88
Predicted P/E12.81
Predicted Price$43.58
Price to Sales Regression
Wells Fargo & CompanyWFC
R-Square0.70
Current Price$37.97
Current P/S2.20
Growth Rate11.08
Beta1.16
Dividend Payout Ratio25.88
Profit Margin13.16
Predicted P/S2.36
Predicted Price$40.69
Price to Book Regression
Wells Fargo & CompanyWFC
R-Square0.40
Current Price$37.97
Current P/B1.38
Growth Rate11.08
Beta1.16
Dividend Payout Ratio25.88
Return on Equity13.16
Predicted P/B1.50
Predicted Price$41.09

Capital One Financial Corp.

Price to Earnings Regression
Capital One Financial Corp.COF
R-Square0.40
Current Price55.16
Current P/E9.83
Growth Rate8.00
Beta1.25
Dividend Payout Ratio3.00
Predicted P/E11.37
Predicted Price$70.61
Price to Sales Regression
Capital One Financial Corp.COF
R-Square0.70
Current Price$55.16
Current P/S1.34
Growth Rate8.00
Beta1.25
Dividend Payout Ratio3.00
Profit Margin9.94
Predicted P/S2.00
Predicted Price$82.40
Price to Book Regression
Capital One Financial Corp.COF
R-Square0.40
Current Price$55.16
Current P/B0.79
Growth Rate8.00
Beta1.25
Dividend Payout Ratio3.00
Return of Equity9.94
Predicted P/B1.23
Predicted Price$86.15

Conclusion

I highlighted these three companies because all three of the models showed significant room to the upside. I believe the financial sector as a whole will continue to outperform the broader market but I would look to these three companies to outperform the entire financial sector. Out of the group, Capital One Financial seems to be the most undervalued relative to the other 20 companies used in the regressions. Please use this information in combination with further qualitative analysis.

Source: Relative Value Regressions: Financials