Citigroup Inc. (C) is a global diversified financial services holding company whose businesses provide consumers, corporations, governments and institutions with a broad range of financial products and services which include consumer banking and credit, corporate and investment banking, securities brokerage and wealth management. On July 15, 2013, the company reported second-quarter earnings of $1.25 per share, which beat the consensus of analysts' estimates by $0.08. The stock is up 66.17% in the past year, and is beating the S&P 500, which has gained 16.57% in the same time frame, and with that in mind I'd like to take a moment to evaluate the stock on a fundamental, financial, and technical basis to see if it's worth buying Citigroup right now after the tremendous run-up in the past year.
Citigroup currently trades at a trailing 12-month P/E ratio of 15.77, which is fairly priced, but I mainly like to purchase a stock based on where the company is going in the future as opposed to what it has done in the past. On that note, the 1-year forward-looking P/E ratio of 9.03 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $5.47/share and I'd consider the stock cheap until at least $82. The one-year PEG ratio (1.47), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a one-year horizon), tells me that Citigroup is fairly priced based on a one-year EPS growth rate of 10.67%.
On a financial basis the things I look for are the dividend payouts, return on assets, equity and investment. Citigroup pays a paltry dividend of 0.08% with a payout ratio of 1.3% while sporting return on assets, equity and investment values of 0.5%, 5% and 9% respectively; which are all respectable values but nothing to write home about. If maybe you feel the market will retract a little more and would like a safety play then the 0.08% yield of this company is not good enough for you to take shelter in for the time being.
Looking first at the relative strength index chart [RSI] at the top, I see the stock at around a middle ground value of 45.02, but with an upward projection; this tells me that there may be a little bit of upside to the stock. To confirm that, I will look at the moving average convergence-divergence (MACD) chart next and see that the black line is below the red line and that the divergence bars are decreasing in height to the upside, indicating there may be a bit of upside coming. As for the stock price itself ($49.37), it's slightly below the 20-day moving average and I'd expect the 20-day moving average to act as resistance while $46.25 acts as support for a risk reward ratio of -6.32% and 1.48%.
- The company is shedding some of its alternative holdings by selling a private equity fund called Citi Venture Capital International.
Citigroup is inexpensively valued based on future earnings but fairly priced on future growth prospects (one-year outlook). Financially, the dividend payout ratio is really low based on trailing 12-month earnings and I don't doubt management will be able to increase the dividend going forward; but "when?" is the question. The technical situation of how the stock is currently trading is telling me we might be seeing some upward movement.
Disclaimer: These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!