Financial stocks may look bleak but that doesn’t mean there might not be opportunity out there for the opportunistic and patient investor. So how does any investor spot a potential diamond in the rough in the trash bin you ask? We like to start by reviewing a company’s P/CFO ratio when starting off on a treasure hunt that involves digging through junk.
The P/CFO ratio measures the market’s expectations of a company’s future financial health and cash flow from operations based off its current operations. A key advantage with this ratio is that it removes non-cash factors and depreciation, which helps provide a clear picture of how much cash a company is actually bringing in relative to the stock price.
We ran a screen for financial companies that have underperformed the S&P 500 over the last month. From this narrowed pool we then screened for companies that appeared cheap relative to their P/CFO ratio (X<10).
The list is ranked from lowest to highest by the P/CFO ratio:
1. Royal Bank of Scotland Group (RBS)
Sector | Financial Services |
Industry | Banks - Global |
Market Cap | $19905 million |
Beta | 2.79 |
Analyst Sentiment | N/A |
The company offers banking and financial services to personal, commercial, corporate, and institutional customers in the UK, US, and beyond. The company’s P/CFO ratio is 0.58. RBS’s 1-month return is -36.59%. The short interest for the company is N/A as of 8/15/2011.
2. PHH Corporation (PHH)
Sector | Financial Services |
Industry | Credit Services |
Market Cap | $1009 million |
Beta | 1.63 |
Analyst Sentiment | 3/3-List Buy/Outperform (Bullish) |
The company offers a mortgage and fleet management outsourcing services in North America. The company’s P/CFO ratio is 0.64. PHH’s 1-month return is -6.67%. The short interest for the company is 14% as of 8/15/2011.
3. Barclays PLC (BCS)
Sector | Financial Services |
Industry | Banks - Global |
Market Cap | $30138 million |
Beta | 2.8 |
Analyst Sentiment | N/A |
The company provides various financial products and services all over the world. The company’s P/CFO ratio is 0.72. BCS’s 1-month return is -28.69%. The short interest for the company is N/A as of 8/15/2011.
4. Bank of America Corporation (BAC)
Sector | Financial Services |
Industry | Banks - Regional - US |
Market Cap | $70636 million |
Beta | 2.45 |
Analyst Sentiment | 17/34-List Hold/Neutral (Neutral) |
The company offers banking and non-banking financial services to a variety of clients in the US and abroad. The company’s P/CFO ratio is 0.74. BAC’s 1-month return is -27.17%. The short interest for the company is 1.3% as of 8/15/2011.
5. Regions Financial Corporation (RF)
Sector | Financial Services |
Industry | Banks - Regional - US |
Market Cap | 4859 million |
Beta | 1.15 |
Analyst Sentiment | 19/25-List Hold/Neutral (Neutral) |
The company offers retail, commercial and mortgage banking services in the US. The company’s P/CFO ratio is 1.14. RF’s 1-month return is -34.58%. The short interest for the company is 3% as of 8/15/2011.
6. Mitsubishi UFJ Financial Group (MTU)
Sector | Financial Services |
Industry | Banks - Global |
Market Cap$ | 64066 million |
Beta | 0.93 |
Analyst Sentiment | 12/14-List Buy/Outperform (Bullish) |
The company offers various financial services to a variety of clients in Japan and internationally. The company’s P/CFO ratio is 1.15. MTU’s 1-month return is -6.4%. The short interest for the company is N/A as of 8/15/2011.
7. KB Financial Group Inc (KB)
Sector | Financial Services |
Industry | Banks - Regional - Asia |
Market Cap | $13346 million |
Beta | 2.16 |
Analyst Sentiment | 26/27-List Buy/Outperform (Bullish) |
The company is a holding company for Kookmin Bank, which offers financial products and services in Korea. The company’s P/CFO ratio is 1.39. KB’s 1-month return is -22.93%. The short interest for the company is N/A as of 8/15/2011.
8. Bbva Banco Frances,S.A. (BFR)
Sector | Financial Services |
Industry | Banks - Regional - Latin America |
Market Cap | $1380 million |
Beta | 1.63 |
Analyst Sentiment | 4/5-List Hold/Neutral (Neutral) |
The company offers financial services to corporate and retail clients in Argentina. The company’s P/CFO ratio is 1.41. BFR’s 1-month return is -20.33%. The short interest for the company is N/A as of 8/15/2011.
9. Synovus Financial Corp (SNV)
Sector | Financial Services |
Industry | Banks - Regional - US |
Market Cap | $1068 million |
Beta | 0.99 |
Analyst Sentiment | 21/29-List Hold/Neutral (Neutral) |
The company offers diversified financial services in the south east US. The company’s P/CFO ratio is 1.41. SNV’s 1-month return is -31.82%. The short interest for the company is 8% as of 8/15/2011.
10. Cowen Group, Inc. (COWN)
Sector | Financial Services |
Industry | Capital Markets |
Market Cap | 378 million |
Beta | 1.12 |
Analyst Sentiment | 1/2-List Hold/Neutral (Neutral) |
The company is an asset management holding company. The company’s P/CFO ratio is 1.42. SNV’s 1-month return is -17.72%. The short interest for the company is 18.8% as of 8/15/2011.
We hope this list helps investors as they do their own due diligence on financial stocks that appear undervalued.
Disclosure: I am long BCS.
