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Goldman Sachs recently added Citizens Financial Group (CFG) to its US Conviction List, citing expectations for robust organic growth in the bank’s private banking arm and further improvements in shareholder returns.
See our latest analysis for Citizens Financial Group.
The recent inclusion on Goldman Sachs’ US Conviction List comes after a period of solid momentum, with a 1-year total shareholder return of 84.48% and a 3-year total shareholder return of 140.06%. The current share price of $60.99 reflects more modest shorter term share price returns.
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With a 1 year total return above 80%, double digit revenue and net income growth, and a share price still below analyst targets and intrinsic value estimates, is Citizens Financial Group undervalued, or is the market already pricing in future growth?
The narrative fair value of $86.72 sits well above Citizens Financial Group’s last close at $60.99, which sets up a clear valuation gap that the narrative is trying to explain.
Citizens Financial is currently $43.60. They will be releasing their quarterly report tomorrow morning during Pre-Market. Currently up 30.96% for the year, and 13.61% out of the last three months. Known for major spikes during the releases of their reports. Here at The Daily Investors, we are expecting a Beat tomorrow. The current estimate is +.79 cents. We are estimating a gain of around +.83 cents. Their last earnings release proved that their company is making a turn around. Several technical signals are showing a positive up trend turning around from their previous two beats. With the economy growing better on a monthly basis, expect to see another leap ahead to join with their fellow banking peers.
Want to see what turns that kind of short term earnings optimism into a much higher long term value estimate? The narrative leans heavily on faster revenue progress, fatter margins, and a richer future earnings multiple to reach its target. The full story is in how those three inputs are combined and projected across many years.
Result: Fair Value of $86.72 (UNDERVALUED)
Have a read of the narrative in full and understand what’s behind the forecasts.
However, keep in mind that a weaker earnings print or a reset in profit margin expectations could quickly challenge the idea that Citizens is 29.7% undervalued.
