If you are wondering whether Citizens Financial Group is still reasonably priced after its recent run, this article will walk through what the current share price might be implying about the bank’s value.
The stock trades at US$65.04, with returns of 6.9% over 30 days, 9.5% year to date, and 42.3% over the past year. These figures can change how investors think about both upside and risk.
Recent coverage of Citizens Financial Group has focused on its position among U.S. regional banks and how investors are treating the sector as conditions evolve. These headlines provide useful context for why the share price has moved the way it has and why valuation is back in focus.
On our checklist of six valuation tests for potential undervaluation, Citizens Financial Group scores 3 out of 6, as shown in its valuation score. Next we will look at how methods like discounted cash flow and market multiples compare, before finishing with a more complete way to think about value at the end of the article.
The Excess Returns model looks at how much value a bank can create above the return that shareholders require. Instead of just focusing on earnings today, it compares the return on equity to the cost of equity and then projects how that gap could add to the bank’s book value over time.
For Citizens Financial Group, the model uses a Book Value of US$56.39 per share and a Stable EPS of US$5.93 per share, based on weighted future Return on Equity estimates from 14 analysts. The average Return on Equity input is 9.48%, while the Cost of Equity is US$4.44 per share. That leaves an Excess Return of US$1.49 per share, which is what this approach treats as value created beyond the required return. The Stable Book Value is set at US$62.54 per share, sourced from weighted future Book Value estimates from 9 analysts.
Combining these inputs, the Excess Returns model produces an intrinsic value estimate of about US$103.07 per share. Compared with the current share price of US$65.04, this implies the stock is 36.9% undervalued.
For a profitable bank like Citizens Financial Group, the P/E ratio is a useful way to think about value because it links what you pay today with the earnings the business is already generating. Investors usually accept a higher P/E if they see stronger growth potential or lower perceived risk, and a lower P/E if they see slower growth or higher uncertainty.
Citizens Financial Group currently trades on a P/E of 16.37x. That sits above the Banks industry average P/E of 11.83x and the peer average of 13.93x, so at first glance the stock carries a higher earnings multiple than many regional banking peers.
Simply Wall St’s Fair Ratio for Citizens Financial Group is 16.80x. This is a proprietary P/E estimate that reflects factors such as the company’s earnings growth profile, its industry, profit margins, market cap and specific risks. Because it blends these into one figure, it can be more tailored than a simple comparison with broad industry or peer averages. The current P/E of 16.37x is slightly below the Fair Ratio of 16.80x, which suggests the shares may be slightly undervalued on this metric.
Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which are simply your story about Citizens Financial Group linked directly to a financial forecast and a Fair Value estimate that you can compare with the current share price.
On Simply Wall St’s Community page, millions of investors can set up a Narrative by choosing their own assumptions for future revenue, earnings and margins, so the numbers line up with their view of the business rather than only relying on a single model.
Each Narrative then ties those assumptions to a Fair Value and updates automatically when fresh information such as earnings or news is added, so your view does not stay frozen when the facts change.
For example, one Citizens Financial Group Narrative on the platform currently uses a Fair Value of US$86.72 per share with a revenue growth rate of 15.0%, while another uses a Fair Value of US$72.28 with a revenue growth rate of 9.43%. Seeing that spread can help you decide how your own expectations compare with other investors and whether the current price looks high, low or about in line with your view.
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.
