Over the past six months, Citigroup has been a great trade, beating the S&P 500 by 20.2%. Its stock price has climbed to $128.42, representing a healthy 27.3% increase. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is now the time to buy Citigroup, or should you be careful about including it in your portfolio? Get the full stock story straight from our expert analysts, it’s free.
Why Is Citigroup Not Exciting?
We’re glad investors have benefited from the price increase, but we're sitting this one out for now. Here are three reasons why C doesn't excite us and a stock we'd rather own.
1. Net Interest Income Points to Soft Demand
Net interest income commands greater market attention due to its reliability and consistency, whereas one-time fees are often seen as lower-quality revenue that lacks the same dependable characteristics.
Citigroup’s net interest income has grown at a 7% annualized rate over the last five years, worse than the broader banking industry.
2. Projected Net Interest Income Growth Is Slim
Forecasted net interest income by Wall Street analysts signals a company’s potential. Predictions may not always be accurate, but accelerating growth typically boosts valuation multiples and stock prices while slowing growth does the opposite.
Over the next 12 months, sell-side analysts expect Citigroup’s net interest income to rise by 4.9%, close to its 5.5% annualized growth for the past two years.
3. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Citigroup’s weak 2.5% annual EPS growth over the last five years aligns with its revenue performance. This tells us it maintained its per-share profitability as it expanded.
Final Judgment
Citigroup isn’t a terrible business, but it isn’t one of our picks. With its shares outperforming the market lately, the stock trades at 1.1× forward P/B (or $128.42 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better stocks to buy right now. Let us point you toward an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of Citigroup
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