Dan Schmeidler

What Is Citi Stock Worth?

C trades at a high PE because future financials (specifically income statements) will not reflect huge write-offs similar to the ones in the past few quarters. Even though the write-offs stem from balance sheet items, they needed to run through the income statement as an expense. That is because companies are not allowed to, let's say, capitalize expenses such as the write-offs. Similarly, when a company profits from the sale of an investment, it needs to run the profits through the income statement, whereas it would probably prefer to capitialize the gain on their balance sheet and depreciate it over time. Certain items, or transactions, can be capitalized on the balance sheet, but the accounting "world" has really tried to clamp down on it to provide clarity for the readers of the financil statements. For example, look at JNY, a profitable Retail company, currently trading at around P/E 4, (industry average is easily double that), because of their (very) profitable sale of Barney's New York to the Saudis.