Citigroup Valuation Suggests A Reality Check With A Warning

| About: Citigroup Inc. (C)

Citigroup (NYSE:C) is one of the major money-center banks in the world. Like so many big companies, Citigroup certainly is not the company it used to be.

In reality, Citigroup does not measure up to its banking peers in this article. I share my assessment of Citigroup in order to help investor expectations conform to reality. In my practice, a reality check is quite similar to my process of comparative analytics. Nowadays, companies either have or do not have clear support for future price appreciation.

Recently, I wrote an article on Bank of America (NYSE:BAC), and I intend to offer my input on JPMorgan Chase (NYSE:JPM) in a week or so. Neither of these, or other banks, are currently competitive with other sectors and industry groups.

Citigroup is currently selling for about $26.00 and has a recent high of $38.40. It is sporting a very high dividend yield of 3.8%. Investors are not likely to be rewarded with share price appreciation in the coming weeks or perhaps months. The recent price decline from the mid-March highs of $38.40 convinces me that lower prices are yet to come.

The bank reported that net income was down 2%, to $2.93 billion. Total revenue was $19.4 billion, down from last year. On the other hand, according to Bloomberg, Citigroup exceeded analysts' estimates. Citigroup intends to submit a request to the Federal Reserve to increase its dividend. This is a lengthy process, so investors will have to wait for an increase in dividend payments.

Price History

Did you know that Citigroup shares sold for over $500 in early 2007? Today's current stock price is only 5% of its selling price just five years ago. The 20-year chart (see below) tells a story that you may want to ponder. This chart compares Citigroup with the SPDR S&P 500 ETF (NYSEARCA:SPY). I use this ETF to provide an important perspective about a company that I am valuating. The first is thing how Citigroup tracks the index in bullish and bearish market time frames. The second thing is a statistical measure of percentage gain and loss during bullish and bearish market time frames. Trends are a very helpful tool when investing wisely.

Current Valuation of Citigroup

Current Price:


Target Price:

plus 6% / minus 20+% from the high.

Trailing P/E


Forward P/E (fye 12/31/13)


PEG Ratio

0.83 - low

Price to Sales:

1.10 - ok

Price to Book:

0.43 - very good

Valuation Divergence:

(minus) - 29%

Source: Raw data taken from Finviz.

Notes for the above table: Target price is calculated and produces a probable range of the current price over the coming one to three months. Valuation divergence is calculated and produces a plus or minus percent of price over the following one to three months after a given bullish or bearish inflection point.

These are not strong Valuations and Target Price Projections. When I do further fundamental studies, the valuation simply does not improve. Projected earnings growth for Citigroup will stay consistent but will fall off in a couple years. Very average technical and consensus opinion analysis suggests that Citigroup will continue to be a longer-term poor performer. Investing in Citigroup at this time, or even holding, definitely is not wise.

Click to enlarge images.

Earnings Chart

Regarding the above chart, please note the following: The earnings per share remains well below the 2007 level. The P/E ratio is flat to down, and the volume is diminishing. These are not supportive facts to foster holding Citigroup in your portfolio.

Financial Statements

I have reviewed the company's income statement and balance sheet. I do not find anything to take issue with. There are many other companies with financials that present a better outlook.

Technical Opinion

It is clear from the above price charts that there is a longer-term problem with Citigroup and very likely its management. Technical indicators are in the process of breaking down. This is my initial warning that prices will be falling in the coming weeks and perhaps beyond.


The above tables and charts present a clear and not-so-positive account of Citigroup. Continuing to hold positions in a company like Citigroup suggests that this "reality check" is not convincing to shareholders.

I recommend taking a few minutes to study my 20-year chart. When buying or selling, taking a longer-term view of a security's price history is very important.

Citigroup, like so many other large-cap companies, is no longer the company it used to be. This is a warning about buying or holding Citigroup.


I am bearish on both the economy and the general market. My recent Instablog postings are focused on securities that should not be held in your portfolio. It is important for you to understand that holding cash during questionable time frames is a wise choice. (This is definitely a "questionable" time frame). This coming Saturday, I plan to include Citigroup in my weekly Instablog posting.

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

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