Valuations for Five Major Banks With Bearish Warnings

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 |  Includes: AAPL, BAC, C, KEY, PNC, STT
by: Steven Bauer

The selection of the five banking firms below is based on the following supportive data as well as both their short and longer-term price and earnings performance. I expect these companies to have improved earnings, but I do not have the confidence, price-wise to take new bullish positions.

For guidance, I normally compare most all securities with Apple (NASDAQ:AAPL). When the securities get close (in my three disciplines) I buy them confidently. Those disciplines are my weighted fundamental, technical and consensus analysis. I also have just two categories of investments. These are a mix of “Bellwether” and “High Profile" companies and are rated and compared below with brief comments.

The market is doing what it loves to do

Lately, that means it is both fundamentally and technically very fickle. What many investors often forget is that what appears to be a fact is, in reality, very creative fiction. The fictional stories being told by Wall Street and the media are so compelling that the average investor takes the hook, line and sinker most every time. That’s a fact and, for me, it is a very sad commentary.

As mentioned above, earning estimates, on balance, are positive for the near-term, and should be improving noticeably throughout the coming year. However, you might remember that the way the "Street" will reward or punish any company in the future is always questionable.

My analytics, to a large degree, has to do with a wide range of comparative and on-going studies. Comparing these five companies along with their peers and other top/strong growth/revenue producing companies does not provide me with sufficient positives to hold long positions.

The Major Bank industry group, both U.S. and international is quite low on my consensus rankings of over 200 industry groups and is ranked as "currently unfavorable." Therefore, I expect the majority to not hold up well during the coming months.

In the tables below you will perhaps see why my valuation approach offers data that I believe can produce profitable investments for the intermediate and longer-term, however definitely not over the near-term. Integrating information and data that is "technical and consensus analysis" is also very important to near-term investment decisions.

Valuation Analytics Table

Major Bank - General Industry Group:

Stock and Symbol

Approx. Current Price

My Target Price % Above (+) / Below (-) Current Price – Valuation is "Tweaked.”

One Year Projections are from the next - - Bullish Inflection Point.

PEG

P/E

Forward P/E

Valuation Divergence (%)

One - Year Projected from a Mean – Sigma and from the next - - Bullish Inflection Point.

1. Bank of Am. (NYSE:BAC)

14.8

30% to 50+%

1.37

17.7

7.9

100+%

Comments: This is an "excellent" valuation and not a bad long-term target price projection. However, adding the technical and consensus analysis, you have a confirmation that BAC is currently just another banking company in trouble!

2. Citigroup, (NYSE:C)

4.9

20% to 40%

1.85

14.1

9.1

54%

Comments: This is an "excellent" valuation and not a bad long-term target price projection. However, adding the technical and consensus analysis, you have a confirmation that C is currently just another banking company in trouble!

3. KeyCorp, (NYSE:KEY)

9.7

25% to 45%

3.03

21.7

12.7

71%

Comments: This is an "excellent" valuation and not a bad long-term target price projection. However, adding the technical and consensus analysis, you have a confirmation that KEY currently is just another banking company in trouble!

4. PNC Financial, (NYSE:PNC)

64.6

10% to 20%

1.80

10.6

10.2

6%

Comments: This is a "poor" valuation and target price projection. However, when you do further Fundamental studies it looks much better. Add to that, the technical and consensus analysis and you have a confirmation that PNC may well remain a winner!

5. State Street, (NYSE:STT)

45.7

10% to 15%

1.27

13.4

10.7

25%

Comments: This is a "good" valuation and not a bad long-term target price projection. However, adding the technical and consensus analysis, you have a confirmation that STT is currently just another banking company in trouble!

Click to enlarge

Summary of the Three Disciplines:

Company Symbol

Category

Fundamental

(weighting 40%)

Technical

(weighting 35%)

Consensus

(weighting 25%)

1. BAC

Bellwether

Excellent

Good

Good

2. C

Bellwether

Very Good

Good

Good

3. KEY

High Profile

Very Good

Good

Good

4. PNC

High Profile

Poor

Very Good

Very Good

5. STT

High Profile

Good

Good

Poor

Click to enlarge

The general market is currently over-valued, over-bought and is showing signs of deterioration, especially in the area of breadth. Interest rates are on the rise and inflation is already a serious problem. This means that you must consider holding cash or perhaps taking bearish positions. I would not recommend taking bearish positions in any of these securities quite yet.

For a current (up to the minute) chart of BAC and C, click here and scroll down.

My focus is "investing wisely," e.g. taking advantage of the bull/bear cycles as they occur within the overall marketplace. Integrating modern fundamental analytics within these technical cycles means maintaining a process of the thorough and ongoing analysis of many companies and industry groups. I believe this is a vital discipline in "investing wisely.”

Source information and data:

  • Yahoo Finance
  • MSN Money
  • MorningStar
  • BarCharts
  • StockCharts



Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.