Citizens Financial Group’s 24% return over the past six months has outpaced the S&P 500 by 17.5%, and its stock price has climbed to $63.62 per share. This performance may have investors wondering how to approach the situation.
Is now the time to buy Citizens Financial Group, or should you be careful about including it in your portfolio? Check out our in-depth research report to see what our analysts have to say, it’s free.
Why Do We Think Citizens Financial Group Will Underperform?
We’re happy investors have made money, but we're swiping left on Citizens Financial Group for now. Here are three reasons why CFG doesn't excite us and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
From lending activities to service fees, most banks build their revenue model around two income sources. Interest rate spreads between loans and deposits create the first stream, with the second coming from charges on everything from basic bank accounts to complex investment banking transactions.
Unfortunately, Citizens Financial Group’s 3.6% annualized revenue growth over the last five years was sluggish. This was below our standard for the banking sector.
2. 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.
Citizens Financial Group’s net interest income has grown at a 5% annualized rate over the last five years, much worse than the broader banking industry.
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.
Citizens Financial Group’s weak 3.5% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.
Final Judgment
We cheer for all companies supporting the economy, but in the case of Citizens Financial Group, we’ll be cheering from the sidelines. With its shares beating the market recently, the stock trades at 1× forward P/B (or $63.62 per share). This multiple tells us a lot of good news is priced in - we think there are better stocks to buy right now. Let us point you toward one of our top software and edge computing picks.
Stocks We Like More Than Citizens Financial Group
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