The last time I wrote about Citigroup Inc. (NYSE:C) I stated, "I will not be buying any more shares right here even though I like the longer-term price appreciation story." Since the last article it dropped 9.02% versus the 0.70% drop the S&P 500 (NYSEARCA:SPY) posted. Citi 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 January 16, 2014, the company reported fourth-quarter earnings of $0.82 per share, which missed the consensus of analysts' estimates by $017. In the past year the company's stock is up 10.25% excluding dividends (up 10.32% including dividends), and is losing to the S&P 500, which has gained 17.8% in the same time frame. With all this 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 more shares of the company right now for the financial sector of my dividend portfolio.
The company currently trades at a trailing 12-month P/E ratio of 10.85, which is inexpensively 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 8.25 is currently inexpensively priced for the future in terms of the right here, right now. Next year's estimated earnings are $5.75 per share and I'd consider the stock inexpensive until about $86. The 1-year PEG ratio (0.73), which measures the ratio of the price you're currently paying for the trailing 12-month earnings on the stock while dividing it by the earnings growth of the company for a specified amount of time (I like looking at a 1-year horizon), tells me that the company is inexpensively priced based on a 1-year EPS growth rate of 14.91%. The company has great near-term future earnings growth potential with a projected EPS growth rate of 14.91%. In addition, the company has great long-term future earnings growth potential with a projected EPS growth rate of 19.55%. Below is a comparison table of the fundamentals metrics for the company for when I wrote all articles pertaining to the company.
EPS Next YR ($)
Target Price ($)
EPS next YR (%)
On a financial basis, the things I look for are the dividend payouts, return on assets, equity and investment. The company pays a dividend of 0.08% with a payout ratio of 1% of trailing 12-month earnings while sporting return on assets, equity and investment values of 0.9%, 8.8% and 7.9%, respectively, which are all respectable values. Because I believe the market may get a bit choppy here and would like a safety play, I don't believe the 0.08% yield of this company is good enough for me to take shelter in for the time being. Below is a comparison table of the financial metrics for the company for when I wrote all articles pertaining to the company.
Payout TTM (%)
Looking first at the relative strength index chart [RSI] at the top, I see the stock getting near oversold territory with a value of 41.46. I will look at the moving average convergence-divergence [MACD] chart next. I see that the black line is below the red line with the divergence bars decreasing in height, indicating some bearish momentum. As for the stock price itself ($47.43), I'm looking at the 50-day simple moving average (currently at $49.34) to act as resistance and $44.53 to act as support for a risk/reward ratio which plays out to be -6.11% to 4.03%.
- The company was removed from Wells' (WFC) Priority List. Wells basically removed Citi over concerns about the emerging market meltdown taking place due to its large exposure overseas.
- KBW says that Citi's exposure to Argentina is manageable. The estimated hit to earnings of the entire Argentina book is written off would be approximately $0.17 per share.
- The bank's CEO Michael Corbat stated at Davos back in late January that the bank has the correct mix of exposures in its portfolio and will continue the course. The "bad" portion of the bank has reduced its assets to $117 billion versus $156 billion from a year ago.
I believe Citi is a great opportunity because I think the 9% decline from the last time I wrote about the company is an overreaction. Fundamentally the company is inexpensively priced again based on future earnings and on future growth potential. Financially the efficiency ratios have increased a bit. On a technical basis I believe we are near the bottom of the individual stock story, but not the market. Due the inexpensive fundamentals, improving financial metrics, and great earnings-growth prospects I'm going to actually pull the trigger on this particular name in the face of this market pullback. Because I swapped out BioMed Realty Trust (NYSE:BMR) for Citi in my dividend portfolio it is only fair that I provide an update from the swap-out date. From November 19, 2013, Citi is down 6.62% while BioMed Realty Trust is up 1.77%. Up until this emerging market meltdown Citi had been outperforming BioMed Realty as seen in the chart below and I don't doubt Citi will make a comeback.
Disclaimer: This article is meant to serve as a journal for myself as to the rationale of why I bought/sold this stock when I look back on it in the future. These are only my personal opinions and you should do your own homework. Only you are responsible for what you trade and happy investing!