8 Financials Trading Below Book Value, Under Five Times Free Cash Flow

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 |  Includes: ASB, COF, ETFC, FITB, KEY, MS, PFG, STI
by: Zvi Bar
Free cash flow is operating cash flow minus capital expenditures. FCF is the cash that a company made after paying out the money required to maintain and/or expand the business. Free cash flow enables a company to pursue acquisitions and growth initiatives, among other options. FCF may also allow a company to initiate or increase dividends.
Below I have screened the market for companies that are in the financial sector but not within the insurance industry. Amongst them, I looked for those that are trading below book value, with trailing earnings, while having a current price to free cash flow (FCF) under 5.
Ticker
Name
Industry
Market Cap
P/B
P/FCF
ASBC
Associated Banc-Corp
Regional - Midwest Banks
$2.31 B
0.73
4.52
Capital One Financial Corp.
Credit Services
$22.23 B
0.81
2.94
E*TRADE Financial Corporation
Investment Brokerage - National
$3.10 B
0.79
2.26
Fifth Third Bancorp
Regional - Midwest Banks
$11.45 B
0.94
3.03
KeyCorp
Money Center Banks
$7.71 B
0.82
4
Morgan Stanley
Investment Brokerage - National
$35.30 B
0.61
2.32
Principal Financial Group Inc.
Asset Management
$9.38 B
0.92
3.02
SunTrust Banks, Inc.
Money Center Banks
$13.93 B
0.72
3.22
Click to enlarge
Book value and free cash flow are two popular metrics amongst value investors, and also important metrics to insurers. These metrics can sometimes look deceptively undervalued when a company is susceptible to significant risk, or where a company’s underlying assets are overvalued and apt for re-evaluation.

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