Is Citizens Financial Group (CFG) Still Attractive After An 84% One-Year Share Price Rally
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Investors may be wondering whether Citizens Financial Group at US$60.99 still offers value after a strong run, or if most of the opportunity is already reflected in the price.
The stock has returned 5.6% over the past 7 days, 2.4% over the last 30 days, 2.7% year to date, 84.5% over 1 year and 140.1% over 3 years, with a 65.7% return across 5 years.
Recent headlines around US regional banks have kept attention on balance sheet strength, interest rate sensitivity and capital return policies. These factors all shape how investors think about banks like Citizens Financial Group and help explain how the share price has reacted over different time periods.
Citizens Financial Group scores a 3 out of 6 valuation checks. The next step is to compare what different valuation methods suggest about that score and then consider a broader framework to judge whether the current price makes sense.
The Excess Returns model asks a simple question: are shareholders earning more on the bank’s equity than the return they require, and if so, how much value does that add to today’s share price.
For Citizens Financial Group, the model starts with a Book Value of US$56.39 per share and a Stable EPS estimate of US$5.97 per share, based on weighted future Return on Equity estimates from 13 analysts. The implied Average Return on Equity is 9.49%. Against this, the Cost of Equity is put at US$4.41 per share, which leaves an Excess Return of US$1.56 per share.
Those excess returns are then projected forward using a Stable Book Value of US$62.94 per share, sourced from weighted future Book Value estimates from 8 analysts, and discounted back to today. This produces an intrinsic value estimate of US$106.17 per share for Citizens Financial Group.
Compared with the current share price of US$60.99, the Excess Returns valuation implies the stock is 42.6% undervalued.
For a profitable bank like Citizens Financial Group, the P/E ratio is a useful shorthand for how much you are paying for each dollar of earnings. It links directly to what matters most for shareholders, which is the earnings power of the business.
What counts as a “normal” P/E depends on how the market views a company’s growth prospects and risk. Higher expected growth or lower perceived risk can justify a higher multiple, while slower growth or higher risk usually points to a lower one.
Citizens Financial Group currently trades on a P/E of 15.36x. This is above the Banks industry average of 11.41x and also above a peer group average of 12.32x. Simply Wall St’s Fair Ratio framework estimates what a P/E might be, given factors such as earnings growth, profit margins, industry, market value and risk profile. That Fair Ratio for Citizens Financial Group is 19.63x, which is higher than the current 15.36x, suggesting the shares trade below that modelled level.
Earlier it was mentioned that there is an even better way to understand valuation. Narratives bring your view of Citizens Financial Group together in one place by tying a simple story about the bank to your own assumptions for future revenue, earnings and margins. This is then turned into a fair value that you can compare with the current price on Simply Wall St’s Community page. Narratives update as new news or earnings arrive. One investor might see fair value at about US$86.72 with faster 15.0% revenue growth and a 16.8788% profit margin, while another might anchor closer to US$72.20 with 9.429481% revenue growth and a 27.545789% margin. This gives you a clear, visual way to judge whether Citizens Financial Group looks expensive or cheap against the story you believe.
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
