Fifth Third Bancorp Valuation – January 2019 $FITB

Company Profile (excerpt from Reuters): Fifth Third Bancorp, incorporated on October 7, 1974, is a bank holding company and a financial holding company. The Company conducts its principal lending, deposit gathering, transaction processing and service advisory activities through its banking and non-banking subsidiaries from banking centers located throughout the Midwestern and Southeastern regions of the United States. The Company operates through four segments: Commercial Banking, Branch Banking, Consumer Lending, and Wealth and Asset Management. The Company diversifies its loan and lease portfolio by offering a range of loan and lease products with various payment terms and rate structures. It offers commercial and industrial loans, commercial mortgage loans, commercial construction loans, commercial leases, residential mortgage loans, home equity, automobile loans, credit card, and other consumer loans and leases. The Company offers various types of deposits, such as demand deposits, interest checking deposits, savings deposits, money market deposits, transaction deposits and other time deposits. As of December 31, 2016, the Company’s total deposits were $103.8 billion. As of December 31, 2016, the Company’s total loans were $92.8 billion.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FITB – January 2019

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $17,701,621,200 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 199.60% Pass
5. Moderate PEmg Ratio PEmg < 20 11.21 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.16 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.41
MG Growth Estimate 7.26%
MG Value $55.48
Opinion Undervalued
MG Grade A
MG Value based on 3% Growth $34.94
MG Value based on 0% Growth $20.48
Market Implied Growth Rate 1.35%
Current Price $27.00
% of Intrinsic Value 48.67%

Fifth Third Bancorp qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.62 in 2014 to an estimated $2.41 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.35% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Fifth Third Bancorp revealed the company was trading below its Graham Number of $36.08. The company pays a dividend of $0.6 per share, for a yield of 2.2%, putting it among the best dividend paying stocks today. Its PEmg (price over earnings per share – ModernGraham) was 11.21, which was below the industry average of 14.65, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Fifth Third Bancorp fares extremely well in the ModernGraham grading system, scoring an A.

Stage 3: Information for Further Research

Graham Number $36.08
PEmg 11.21
PB Ratio 1.16
Dividend Yield 2.22%
TTM Dividend $0.60
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 9/1/2018
Long-Term Debt & Capital Lease Obligation $14,460,000,000
Total Assets $141,685,000,000
Intangible Assets $3,500,000,000
Total Liabilities $125,835,000,000
Shares Outstanding (Diluted Average) 679,199,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.67
Dec2017 $2.83
Dec2016 $1.93
Dec2015 $2.01
Dec2014 $1.66
Dec2013 $2.02
Dec2012 $1.66
Dec2011 $1.18
Dec2010 $0.63
Dec2009 $0.67
Dec2008 -$3.91
Dec2007 $1.99
Dec2006 $2.13
Dec2005 $2.77
Dec2004 $2.68
Dec2003 $3.03
Dec2002 $2.59
Dec2001 $1.70
Dec2000 $1.83
Dec1999 $1.43
Dec1998 $1.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.41
Dec2017 $2.22
Dec2016 $1.89
Dec2015 $1.82
Dec2014 $1.62
Dec2013 $1.48
Dec2012 $0.82
Dec2011 $0.31
Dec2010 $0.01
Dec2009 $0.05
Dec2008 $0.20
Dec2007 $2.34
Dec2006 $2.56
Dec2005 $2.70
Dec2004 $2.57
Dec2003 $2.38
Dec2002 $1.95

Recommended Reading:

Other ModernGraham posts about the company

Fifth Third Bancorp Valuation – March 2018 $FITB
Best Stocks Below Their Graham Number – March 2017
Best Stocks to Invest In: the Bank Industry – August 2016
10 Most Undervalued Companies for the Enterprising Investor – July 2016
9 Best Stocks For Value Investors This Week – 7/8/16

Other ModernGraham posts about related companies

Zions Bancorp Valuation – January 2019 $ZION
Regions Financial Corp Valuation – January 2019 $RF
Huntington Bancshares Inc Valuation – January 2019 $HBAN
PNC Financial Services Group Inc Valuation – January 2019 $PNC
KeyCorp Valuation – January 2019 $KEY
Citigroup Inc Valuation – January 2019 $C
People’s United Financial Inc Valuation – January 2019 $PBCT
JPMorgan Chase & Co Valuation – November 2018 $JPM
CVB Financial Corp Valuation – September 2018 $CVBF
Customers Bancorp Inc Valuation – September 2018 $CUBI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Fifth Third Bancorp Valuation – March 2018 $FITB

Company Profile (excerpt from Reuters): Fifth Third Bancorp, incorporated on October 7, 1974, is a bank holding company and a financial holding company. The Company conducts its principal lending, deposit gathering, transaction processing and service advisory activities through its banking and non-banking subsidiaries from banking centers located throughout the Midwestern and Southeastern regions of the United States. The Company operates through four segments: Commercial Banking, Branch Banking, Consumer Lending, and Wealth and Asset Management. The Company diversifies its loan and lease portfolio by offering a range of loan and lease products with various payment terms and rate structures. It offers commercial and industrial loans, commercial mortgage loans, commercial construction loans, commercial leases, residential mortgage loans, home equity, automobile loans, credit card, and other consumer loans and leases. The Company offers various types of deposits, such as demand deposits, interest checking deposits, savings deposits, money market deposits, transaction deposits and other time deposits. As of December 31, 2016, the Company’s total deposits were $103.8 billion. As of December 31, 2016, the Company’s total loans were $92.8 billion.

FITB Chart

FITB data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of FITB – March 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $23,658,136,842 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 181.45% Pass
5. Moderate PEmg Ratio PEmg < 20 14.84 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.47 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.26
MG Growth Estimate 5.88%
MG Value $45.76
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $32.76
MG Value based on 0% Growth $19.20
Market Implied Growth Rate 3.17%
Current Price $33.53
% of Intrinsic Value 73.27%

Fifth Third Bancorp qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $1.62 in 2014 to an estimated $2.26 for 2018. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.17% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

At the time of valuation, further research into Fifth Third Bancorp revealed the company was trading above its Graham Number of $32.9. The company pays a dividend of $0.6 per share, for a yield of 1.8% Its PEmg (price over earnings per share – ModernGraham) was 14.84, which was below the industry average of 24.17, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Fifth Third Bancorp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $32.90
PEmg 14.84
PB Ratio 1.47
Dividend Yield 1.79%
TTM Dividend $0.60
Number of Consecutive Years of Dividend Growth 7

Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $14,904,000,000
Total Assets $142,193,000,000
Intangible Assets $3,330,000,000
Total Liabilities $125,828,000,000
Shares Outstanding (Diluted Average) 716,646,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $2.22
Dec2017 $2.83
Dec2016 $1.93
Dec2015 $2.01
Dec2014 $1.66
Dec2013 $2.02
Dec2012 $1.66
Dec2011 $1.18
Dec2010 $0.63
Dec2009 $0.67
Dec2008 -$3.91
Dec2007 $1.99
Dec2006 $2.13
Dec2005 $2.77
Dec2004 $2.68
Dec2003 $3.03
Dec2002 $2.59
Dec2001 $1.70
Dec2000 $1.83
Dec1999 $1.43
Dec1998 $1.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.26
Dec2017 $2.22
Dec2016 $1.89
Dec2015 $1.82
Dec2014 $1.62
Dec2013 $1.48
Dec2012 $0.82
Dec2011 $0.31
Dec2010 $0.01
Dec2009 $0.05
Dec2008 $0.20
Dec2007 $2.34
Dec2006 $2.56
Dec2005 $2.70
Dec2004 $2.57
Dec2003 $2.38
Dec2002 $1.95

Recommended Reading:

Other ModernGraham posts about the company

Fifth Third Bancorp Valuation – July 2016 $FITB
Stocks Trading Below Their Graham Number – May 2016
Stocks Trading Below Their Graham Number – February 2016
10 Most Undervalued Companies for the Enterprising Investor – February 2016
10 Most Undervalued Companies for the Enterprising Investor – February 2016

Other ModernGraham posts about related companies

Regions Financial Corp Valuation – March 2018 $RF
Huntington Bancshares Inc Valuation – March 2018 $HBAN
Zions Bancorp Valuation – March 2018 $ZION
State Street Corp Valuation – March 2018 $STT
PNC Financial Services Group Inc Valuation – March 2018 $PNC
KeyCorp Valuation – March 2018 $KEY
Canadian Western Bank Valuation – March 2018 $TSE-CWB
Simmons First National Corp Valuation – March 2018 $SFNC
Citigroup Inc Valuation – March 2018 $C
People’s United Financial Inc Valuation – March 2018 $PBCT

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Fifth Third Bancorp Valuation – July 2016 $FITB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Companies Benjamin Graham Would Invest In Today – June 2016.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Fifth Third Bancorp (FITB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fifth Third Bancorp is a bank holding company and a financial holding company. The Company conducts its principal lending, deposit gathering, transaction processing and service advisory activities through its banking and non-banking subsidiaries from banking centers located throughout the Midwestern and Southeastern regions of the United States. The Company operates through four segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. It offers commercial and industrial loans, commercial mortgage loans, commercial construction loans, commercial leases, residential mortgage loans, home equity, automobile loans, credit card, and other consumer loans and leases. The Company offers various types of deposits, such as demand deposits, interest checking deposits, savings deposits, money market deposits, transaction deposits and other time deposits.

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To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

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Downloadable PDF version of this valuation:

ModernGraham Valuation of FITB – July 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $13,748,686,511 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -502.34% Fail
5. Moderate PEmg Ratio PEmg < 20 10.01 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.83 Pass
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

FITB value chart July 2016

EPSmg $1.74
MG Growth Estimate 15.00%
MG Value $67.04
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $25.25
MG Value based on 0% Growth $14.80
Market Implied Growth Rate 0.75%
Current Price $17.43
% of Intrinsic Value 26.00%

Fifth Third Bancorp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $0.82 in 2012 to an estimated $1.74 for 2016. This level of demonstrated earnings growth outpaces the market’s implied estimate of 0.75% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

Fifth Third Bancorp performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

FITB charts July 2016

Graham Number $25.45
PEmg 10.01
PB Ratio 0.83
Dividend Yield 2.98%
TTM Dividend $0.52
Number of Consecutive Years of Dividend Growth 6

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information 3/1/2016
Long-Term Debt $15,305,000,000
Total Assets $142,430,000,000
Intangible Assets $3,112,000,000
Total Liabilities $126,107,000,000
Shares Outstanding (Diluted Average) 778,392,000

Earnings Per Share History

Next Fiscal Year Estimate $1.48
Dec2015 $2.01
Dec2014 $1.66
Dec2013 $2.02
Dec2012 $1.66
Dec2011 $1.18
Dec2010 $0.63
Dec2009 $0.67
Dec2008 -$3.94
Dec2007 $1.99
Dec2006 $2.13
Dec2005 $2.77
Dec2004 $2.68
Dec2003 $3.03
Dec2002 $2.76
Dec2001 $1.86
Dec2000 $1.83
Dec1999 $1.43
Dec1998 $1.17
Dec1997 $1.13
Dec1996 $0.96

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.74
Dec2015 $1.82
Dec2014 $1.62
Dec2013 $1.48
Dec2012 $0.82
Dec2011 $0.30
Dec2010 $0.01
Dec2009 $0.04
Dec2008 $0.19
Dec2007 $2.34
Dec2006 $2.57
Dec2005 $2.74
Dec2004 $2.62
Dec2003 $2.46
Dec2002 $2.05
Dec2001 $1.63
Dec2000 $1.44

Recommended Reading:

Other ModernGraham posts about the company

Stocks Trading Below Their Graham Number – May 2016
Stocks Trading Below Their Graham Number – February 2016
10 Most Undervalued Companies for the Enterprising Investor – February 2016
10 Most Undervalued Companies for the Enterprising Investor – February 2016
19 Best Stocks For Value Investors This Week – 1/9/16

Other ModernGraham posts about related companies

Zions Bancorp Valuation – June 2016 $ZION
Regions Financial Corp – June 2016 $RF
Wells Fargo & Co Valuation – June 2016 $WFC
Huntington Bancshares Inc Valuation – June 2016 $HBAN
State Street Corp Valuation – June 2016 $STT
KeyCorp Valuation – June 2016 $KEY
PNC Financial Services Group Inc Valuation – June 2016 $PNC
People’s United Financial Inc Valuation – June 2016 $PBCT
BB&T Corporation Valuation – May 2016 $BBT
SunTrust Banks Inc Valuation – February 2016 $STI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Fifth Third Bancorp Valuation – January 2016 Update $FITB

Benjamin Graham taught that Intelligent Investors must do a thorough fundamental analysis of investment opportunities to determine their intrinsic value and inherent risk.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company or by reviewing the 10 Most Undervalued Companies for the Defensive Investor – November 2015.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a stock analysis showing a specific look at how Fifth Third Bancorp (FITB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fifth Third Bancorp is a bank holding company. The Company’s subsidiary, Fifth Third Bank, provide a range of financial products and services to the retail, commercial, financial, governmental, educational and medical sectors, and credit products, such as credit cards, installment loans, mortgage loans and leases. The Company operates in four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. Commercial Banking offers credit intermediation, cash management and financial services to market businesses and Government, and professional customers. Branch Banking provides a range of deposit and loan and lease products to individuals and businesses through approximately 1,302 Banking Centers. Consumer Lending includes its mortgage, home equity, automobile and other indirect lending activities. Investment Advisors provides a range of investment alternatives for individuals, companies and not-for-profit organizations.

[level-free]

To read the details of this valuation, you must be logged in as a premium member. If you are not a premium member, please consider becoming one.

Premium members can view a full ModernGraham valuation of the company and have access to download a PDF version of the valuation for easy reference. Here is a free sample valuation pdf, and here is a post detailing what can be found within each individual company’s valuation.

[/level-free]
[not-level-free]

Downloadable PDF version of this valuation:

ModernGraham Valuation of FITB – January 2016

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,548,993,999 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 2414.29% Pass
5. Moderate PEmg Ratio PEmg < 20 11.67 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.00 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

FITB value Chart January 2016

EPSmg $1.68
MG Growth Estimate 15.00%
MG Value $64.68
Opinion Undervalued
MG Value based on 3% Growth $24.36
MG Value based on 0% Growth $14.28
Market Implied Growth Rate 1.59%
Current Price $19.61
% of Intrinsic Value 30.32%

Fifth Third Bancorp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor is concerned with the insufficient earnings stability over the last ten years.  The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.31 in 2011 to an estimated $1.68 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.59% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Fifth Third Bancorp (FITB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

FITB Charts January 2016

Graham Number $25.61
PEmg 11.67
PB Ratio 1.00
Dividend Yield 2.65%
Number of Consecutive Years of Dividend Growth 5

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Balance Sheet Information Sep15
Long-Term Debt $15,527,000,000
Total Assets $141,918,000,000
Intangible Assets $3,186,000,000
Total Liabilities $126,092,000,000
Shares Outstanding (Diluted Average) 805,023,000

Earnings Per Share History

Next Fiscal Year Estimate $1.60
Dec14 $1.66
Dec13 $2.02
Dec12 $1.66
Dec11 $1.18
Dec10 $0.63
Dec09 $0.67
Dec08 -$3.91
Dec07 $1.99
Dec06 $2.13
Dec05 $2.77
Dec04 $2.68
Dec03 $3.03
Dec02 $2.59
Dec01 $1.70
Dec00 $1.83
Dec99 $1.43
Dec98 $1.19
Dec97 $1.15
Dec96 $0.94
Dec95 $0.86

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.68
Dec14 $1.62
Dec13 $1.48
Dec12 $0.82
Dec11 $0.31
Dec10 $0.01
Dec09 $0.05
Dec08 $0.20
Dec07 $2.34
Dec06 $2.56
Dec05 $2.70
Dec04 $2.57
Dec03 $2.38
Dec02 $1.95
Dec01 $1.58
Dec00 $1.45
Dec99 $1.21

Recommended Reading:

Other ModernGraham posts about the company

13 Best Stocks For Value Investors This Week – 10/3/15
Fifth Third Bancorp Analysis – October 2015 Update $FITB
The 9 Best Stocks For Value Investors This Week – 7/18/15
Fifth Third Bancorp Analysis – July 2015 Update $FITB
A Glimpse at the Banking Industry – May 2015

Other ModernGraham posts about related companies

Huntington Bancshares Valuation – January 2016 Update $HBAN
Wells Fargo & Co Valuation – December 2015 Update $WFC
Citigroup Inc Valuation – December 2015 Update $C
People’s United Financial Corp Valuation – December 2015 Update $PBCT
M&T Bank Corp Valuation – December 2015 Update $MTB
KeyCorp Valuation – November 2015 Update $KEY
State Street Corp Valuation – November 2015 Update $STT
BB&T Corporation Valuation – November 2015 Update $BBT
PNC Financial Services Group Valuation – November 2015 Update $PNC
SunTrust Banks Inc. Valuation – November 2015 Update $STI

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

Fifth Third Bancorp Analysis – October 2015 Update $FITB

In the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.

We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.

In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

What follows is a specific look at how Fifth Third Bancorp (FITB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fifth Third Bancorp is a bank holding company. The Company’s subsidiary, Fifth Third Bank, provide a range of financial products and services to the retail, commercial, financial, governmental, educational and medical sectors, and credit products, such as credit cards, installment loans, mortgage loans and leases. The Company operates in four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. Commercial Banking offers credit intermediation, cash management and financial services to market businesses and Government, and professional customers. Branch Banking provides a range of deposit and loan and lease products to individuals and businesses through approximately 1,302 Banking Centers. Consumer Lending includes its mortgage, home equity, automobile and other indirect lending activities. Investment Advisors provides a range of investment alternatives for individuals, companies and not-for-profit organizations.
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Downloadable PDF version of this valuation:

ModernGraham Valuation of FITB

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $15,477,670,331 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 2794.44% Pass
5. Moderate PEmg Ratio PEmg < 20 11.28 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.97 Pass
Score
Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.
1. Earnings Stability Positive EPS for 5 years prior Pass
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Pass

Stage 2: Determination of Intrinsic Value

FITB value chart October 2015

EPSmg $1.66
MG Growth Estimate 15.00%
MG Value $63.78
Opinion Undervalued
MG Value based on 3% Growth $24.02
MG Value based on 0% Growth $14.08
Market Implied Growth Rate 1.39%
Current Price $18.68
% of Intrinsic Value 29.29%

Fifth Third Bancorp qualifies for the Enterprising Investor but not the more conservative Defensive Investor.  The Defensive Investor has concerns regarding the insufficient earnings stability over the last ten years while the Enterprising Investor has no initial concerns.  As a result, all Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with the next stage of the analysis.

As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.30 in 2011 to an estimated $1.66 for 2015.  This level of demonstrated earnings growth outpaces the market’s implied estimate of 1.39% annual earnings growth over the next 7-10 years.  As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value above the price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Fifth Third Bancorp (FITB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Stage 3: Information for Further Research

FITB charts October 2015

Graham Number $24.63
PEmg 11.28
PB Ratio 0.97
Dividend Yield 2.78%
Number of Consecutive Years of Dividend Growth 5

 

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Useful Links:

ModernGraham tagged articles Morningstar
Google Finance MSN Money
Yahoo Finance Seeking Alpha
GuruFocus SEC Filings

Most Recent Balance Sheet Figures

Long-Term Debt $13,521,000,000
Total Assets $141,658,000,000
Intangible Assets $3,283,000,000
Total Liabilities $126,053,000,000
Shares Outstanding (Diluted Average) 812,843,000

Earnings Per Share History

Next Fiscal Year Estimate $1.53
Dec14 $1.66
Dec13 $2.02
Dec12 $1.66
Dec11 $1.18
Dec10 $0.63
Dec09 $0.67
Dec08 -$3.94
Dec07 $1.99
Dec06 $2.13
Dec05 $2.77
Dec04 $2.68
Dec03 $3.03
Dec02 $2.76
Dec01 $1.86
Dec00 $1.83
Dec99 $1.43
Dec98 $1.17
Dec97 $1.13
Dec96 $0.95
Dec95 $0.86

Earnings Per Share – ModernGraham History

Next Fiscal Year Estimate $1.66
Dec14 $1.62
Dec13 $1.48
Dec12 $0.82
Dec11 $0.30
Dec10 $0.01
Dec09 $0.04
Dec08 $0.19
Dec07 $2.34
Dec06 $2.57
Dec05 $2.74
Dec04 $2.62
Dec03 $2.46
Dec02 $2.05
Dec01 $1.63
Dec00 $1.44
Dec99 $1.20

Recommended Reading:

Other ModernGraham posts about the company

The 9 Best Stocks For Value Investors This Week – 7/18/15
Fifth Third Bancorp Analysis – July 2015 Update $FITB
A Glimpse at the Banking Industry – May 2015
10 Companies Benjamin Graham Would Invest In Today – April 2015
24 Companies in the Spotlight This Week – 3/28/15

Other ModernGraham posts about related companies

Huntington Bancshares Inc. Analysis – October 2015 Update $HBAN
JPMorgan Chase & Co. Analysis – September 2015 Update $JPM
Citigroup Inc. Analysis – September 2015 Update $C
Wells Fargo & Co. Analysis – September 2015 Update $WFC
People’s United Financial Inc. Analysis – August 2015 Update $PBCT
M&T Bank Corporation Analysis – August 2015 Update $MTB
KeyCorp Analysis – August 2015 Update $KEY
State Street Corporation Analysis – August 2015 Update $STT
BB&T Corporation Analysis – August 2015 Update $BBT
PNC Financial Services Group Inc. Analysis – August 2015 Update $PNC

Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please review our detailed disclaimer.

Fifth Third Bancorp Analysis – July 2015 Update $FITB

220px-Fifth_Third_Bank.svgFifth Third Bancorp (FITB) currently yields about a 2.5% dividend, and has grown its earnings well over the last few years. Recently, multiple analysts have focused on qualitative factors when reviewing the company. For example, Seeking Alpha contributor Oguz Erkol discussed the company’snarrowing spreads, while Abba’s Aces claimed the company has little earnings growth potential without elaboration.These are great factors to consider in the final stages of an investment decision, but first one must use quantitative metrics to determine the company’s intrinsic value.

Benjamin Graham, the father of value investing, taught that the most important aspect to consider is whether the company is trading at a discount relative to its intrinsic value. It is through a thorough fundamental analysis that the investor is able to make a determination about a potential investment’s merits.

The model is inspired by the teachings of Benjamin Graham and considers numerous metrics intended to help the investor reduce risk levels. The first part of the analysis is to determine whether the company is suitable for the very conservative Defensive Investor or the less conservative Enterprising Investor, who is willing to spend a greater amount of time conducting further research.

In addition, Graham strongly suggested that investors avoid speculation in order to remove the subjective elements of emotion. This is best achieved by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another. By using theModernGraham method, one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.

FITB Chart

FITB data by YCharts

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Defensive Investor – Must pass all 6 of the following tests: Score = 5/6

  1. Adequate Size of Enterprise – Market capitalization of at least $2 billion – PASS
  2. Earnings Stability – Positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – Has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – Earnings per share has increased by at least 1/3rd over the last 10 years, using 3-year averages at the beginning and end of the period – PASS
  5. Moderate PEmg (price over normalized earnings) Ratio – PEmg is less than 20 – PASS
  6. Moderate Price-to-Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – Must pass all 3 of the following tests or be suitable for a Defensive Investor: Score = 3/3

  1. Earnings Stability – Positive earnings per share for at least 5 years – PASS
  2. Dividend Record – Currently pays a dividend – PASS
  3. Earnings Growth – EPSmg greater than that 5 years ago – PASS

Valuation Summary

Key Data

Recent Price $20.84
MG Value $64.17
MG Opinion Undervalued
Value Based on 3% Growth $24.17
Value Based on 0% Growth $14.17
Market Implied Growth Rate 2.00%
PEmg 12.5
PB Ratio 1.08

Balance Sheet – March 2015

Total Debt $14,055,000,000
Total Assets $140,470,000,000
Intangible Assets $3,219,000,000
Total Liabilities $124,606,000,000
Outstanding Shares 818,700,000

Earnings Per Share

2015 (estimate) $1.56
2014 $1.66
2013 $2.02
2012 $1.66
2011 $1.18
2010 $0.63
2009 $0.67
2008 ($3.91)
2007 $1.99
2006 $2.13
2005 $2.77

Earnings Per Share – ModernGraham

2015 (estimate) $1.67
2014 $1.62
2013 $1.48
2012 $0.82
2011 $0.31
2010 $0.01

Dividend History

FITB Dividend Chart

FITB Dividend data by YCharts

Conclusion

Fifth Third passes the initial requirements of the Enterprising Investor but not the Defensive Investor. In fact, the company passes every requirement of the Enterprising Investor types, but the Defensive Investor is concerned by the lack of earnings stability over the last ten years. As a result, all Enterprising Investors should feel very comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

When it comes to that valuation, it is critical to consider the company’s earnings history. In this case, it has grown its EPSmg (normalized earnings) from $0.31in 2011 to an estimated $1.67 for 2015. This is a fairly strong level of demonstrated growth, and outpaces the market’s implied estimate for annual earnings growth of only 2% over the next 7-10 years.

In recent years, the company’s actual growth in EPSmg has considerably higher annually, and while the ModernGraham valuation model reduces the actual growth to a more conservative figure when making an estimate, the model still returns an estimate of intrinsic value well above the current price, indicating that Fifth Third is significantly undervalued at the present time.

Disclaimer:  The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

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Fifth Third Bancorp Quarterly Valuation – March 2015 $FITB

220px-Fifth_Third_Bank.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Fifth Third Bancorp (FITB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fifth Third Bancorp (the Bancorp) is a bank holding company. The Company, through its banking subsidiary, Fifth Third Bank, provides a range of financial products and services to the retail, commercial, financial, governmental, educational and medical sectors, including a wide variety of checking, savings and money market accounts, and credit products such as credit cards, installment loans, mortgage loans and leases. The Company’s commercial banking division offers credit intermediation, cash management and financial services. The commercial banking products and services also include global cash management, foreign exchange and international trade finance, derivatives and capital markets services, asset-based lending, real estate finance, public finance, commercial leasing and syndicated finance. The Company’s branch banking division provides a range of deposit, and loan and lease products to individuals and small businesses.
FITB Chart

FITB data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 4/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $18.75
MG Value $62.50
MG Opinion Undervalued
Value Based on 3% Growth $23.54
Value Based on 0% Growth $13.80
Market Implied Growth Rate 1.53%
PEmg 11.55
PB Ratio 0.99

Balance Sheet – December 2014

Total Debt $14,967,000,000
Total Assets $138,706,000,000
Intangible Assets $3,289,000,000
Total Liabilities $123,080,000,000
Outstanding Shares 827,700,000

Earnings Per Share

2014 $1.66
2013 $2.02
2012 $1.66
2011 $1.18
2010 $0.63
2009 $0.67
2008 -$3.91
2007 $1.99
2006 $2.13
2005 $2.77
2004 $2.68

Earnings Per Share – ModernGraham 

2014 $1.62
2013 $1.48
2012 $0.82
2011 $0.31
2010 $0.01
2009 $0.05

Dividend History
FITB Dividend Chart

FITB Dividend data by YCharts

Conclusion

Fifth Third Bancorp qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability or growth over the last ten years, while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $0.01 in 2010 to $1.62 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 1.53% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

Be sure to check out previous ModernGraham valuations of Fifth Third Bancorp (FITB) for greater perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Fifth Third Bancorp (FITB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Fifth Third Bancorp (FITB) or in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Fifth Third Bancorp Quarterly Valuation – December 2014 $FITB

220px-Fifth_Third_Bank.svg

Fifth Third Bancorp performs well in the initial stages of the analysis for the Enterprising Investor, passing all of the requirements. Defensive Investors, however, are concerned by the insufficient earnings growth or stability over the last ten years. Therefore, only Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s teachings should feel comfortable proceeding to the next part of the analysis, which is a determination of the company’s intrinsic value.

To determine an estimate of the intrinsic value, one must consider the company’s earnings. Here, the company has grown its EPSmg (normalized earnings) from $0.01 in 2010 to an estimated $1.62 for 2014. This achieved growth rate is well above the market’s implied forecast of only 1.96% earnings growth over the next 7-10 years. The company would have to see a significant slowdown in growth in order to be valued at the market’s current price. As a result, the ModernGraham valuation model returns an estimate of intrinsic value well above the price, supporting a clear conclusion that the company is significantly undervalued. All value investors are therefore encouraged to proceed with further research to determine whether the company is suitable for their own individual portfolios.

Be sure to check out previous ModernGraham valuations of Fifth Third Bancorpfor greater perspective!

Read the full valuation on Seeking Alpha!

FITB Chart

FITB data by YCharts

Disclaimer:  The author did not hold a position in Fifth Third Bancorp (FITB) at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from Wikipedia for the sole purpose of identifying the company; this article is not affiliated with the company in any manner.

Fifth Third Bancorp Quarterly Stock Valuation – September 2014 $FITB

220px-Fifth_Third_Bank.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to whittle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Fifth Third Bancorp (FITB) fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fifth Third Bancorp (the Bancorp) is a diversified financial services company. As of December 31, 2011, the Bancorp had $117 billion in assets, operated 15 affiliates with 1,316 full-service Banking Centers, including 104 Bank Mart locations open seven days a week inside select grocery stores, and 2,425 automated teller machines (ATMs) in 12 states throughout the Midwestern and Southeastern regions of the United States. The Bancorp operates in four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. The Bancorp also has a 49% interest in Vantiv Holding, LLC.
FITB Chart

FITB data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 4/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $20.70
MG Value $62.14
MG Opinion Undervalued
Value Based on 3% Growth $23.40
Value Based on 0% Growth $13.72
Market Implied Growth Rate 2.16%
PEmg 12.83
PB Ratio 1.13

Balance Sheet – 6/30/2014

Total Debt $13,961,000,000
Total Assets $132,562,000,000
Intangible Assets $3,364,000,000
Total Liabilities $117,093,000,000
Outstanding Shares 844,490,000

Earnings Per Share

2014 (estimate) $1.67
2013 $2.01
2012 $1.63
2011 $1.15
2010 $0.63
2009 $0.70
2008 -$3.94
2007 $1.99
2006 $2.12
2005 $2.77
2004 $2.68

Earnings Per Share – ModernGraham 

2014 (estimate) $1.61
2013 $1.47
2012 $0.81
2011 $0.30
2010 $0.02
2009 $0.05

Dividend History

FITB Dividend Chart

FITB Dividend data by YCharts

Conclusion:

Fifth Third Bancorp qualifies for the Enterprising Investor but not the Defensive Investor.  The Defensive Investor is concerned by the lack of earnings stability or growth over the last ten years while the company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should feel comfortable proceeding with further research into the company and comparing it to other opportunities.  As for a valuation, the company appears undervalued after growing its EPSmg (normalized earnings) from $0.02 in 2010 to an estimated $1.61 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 2.16% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value above the market price.

Be sure to check out the previous ModernGraham valuations of Fifth Third Bancorp (FITB) for more perspective!

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Fifth Third Bancorp (FITB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Fifth Third Bancorp (FITB) or in any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

Fifth Third Bancorp Quarterly Valuation – June 2014 $FITB

220px-Fifth_Third_Bank.svgIn the wake of the great financial crisis it can sometimes be difficult for Intelligent Investors to find a solid financial company in which to invest, because they require specific achievements over the historical period.  Many investors may simply decide to throw out the worst years with the rationale that they are outliers that shouldn’t be considered when evaluating the company’s prospects, but doing so would involve speculation.  We don’t know whether the financial crisis will happen again, but we do know that if it does, we can expect to see similar results as we did before.  By continuing to require the same standards for the historical period, Intelligent Investors are able to widdle down banks to only those with the best financial position, and then they are able to determine an intrinsic value to get a sense of whether the company is a good investment.  In addition, a company must have strong financial statements to prove that it is stable enough for Intelligent Investors.  This is best done by utilizing a systematic approach to analysis that will provide investors with a sense of how a specific company compares to another company.  By using the ModernGraham method one can review a company’s historical accomplishments and determine an intrinsic value that can be compared across industries.  What follows is a specific look at how Fifth Third Bancorp fares in the ModernGraham valuation model.

Company Profile (obtained from Google Finance): Fifth Third Bancorp (the Bancorp) is a diversified financial services company. As of December 31, 2011, the Bancorp had $117 billion in assets, operated 15 affiliates with 1,316 full-service Banking Centers, including 104 Bank Mart locations open seven days a week inside select grocery stores, and 2,425 automated teller machines (ATMs) in 12 states throughout the Midwestern and Southeastern regions of the United States. The Bancorp operates in four business segments: Commercial Banking, Branch Banking, Consumer Lending and Investment Advisors. The Bancorp also has a 49% interest in Vantiv Holding, LLC.

FITB Chart

FITB data by YCharts

Defensive Investor – must pass all 6 of the following tests: Score = 4/6

  1. Adequate Size of Enterprise – market capitalization of at least $2 billion – PASS
  2. Earnings Stability – positive earnings per share for at least 10 straight years – FAIL
  3. Dividend Record – has paid a dividend for at least 10 straight years – PASS
  4. Earnings Growth – earnings per share has increased by at least 1/3 over the last 10 years using 3 year averages at beginning and end of period – FAIL
  5. Moderate PEmg ratio – PEmg is less than 20 – PASS
  6. Moderate Price to Assets – PB ratio is less than 2.5 or PB x PEmg is less than 50 – PASS

Enterprising Investor – must pass all 3 of the following tests or be suitable for a defensive investor: Score = 3/3

  1. Earnings Stability – positive earnings per share for at least 5 years – PASS
  2. Dividend Record – currently pays a dividend – PASS
  3. Earnings growth – EPSmg greater than 5 years ago – PASS

Valuation Summary

Key Data:

Recent Price $21.26
MG Value $61.24
MG Opinion Undervalued
Value Based on 3% Growth $23.06
Value Based on 0% Growth $13.52
Market Implied Growth Rate 2.43%
PEmg 13.37
PB Ratio 1.22

Balance Sheet – 3/31/2014

Total Debt $11,233,000,000
Total Assets $129,654,000,000
Intangible Assets $3,409,000,000
Total Liabilities $114,828,000,000
Outstanding Shares 847,570,000

Earnings Per Share

2014 (estimate) $1.60
2013 $2.01
2012 $1.63
2011 $1.15
2010 $0.63
2009 $0.70
2008 -$3.94
2007 $1.99
2006 $2.12
2005 $2.77
2004 $2.68

Earnings Per Share – ModernGraham 

2014 (estimate) $1.59
2013 $1.47
2012 $0.81
2011 $0.30
2010 $0.02
2009 $0.05

Dividend History
FITB Dividend Chart

FITB Dividend data by YCharts

Conclusion:

Fifth Third Bancorp is suitable for Enterprising Investors but not for Defensive Investors, who are concerned with the lack of earnings stability over the last ten years and the lack of earnings growth over the same period.  The company passes all of the Enterprising Investor’s requirements.  As a result, Enterprising Investors following the ModernGraham approach based on Benjamin Graham’s methods should explore other opportunities through a review of ModernGraham’s valuation of JP Morgan Chase (JPM) and ModernGraham’s valuation of Wells Fargo (WFC).  As for a valuation, the company appears to be undervalued after growing its EPSmg (normalized earnings) from $0.02 in 2010 to an estimated $1.59 for 2014.  This level of demonstrated growth outpaces the market’s implied estimate of 2.43% earnings growth and leads the ModernGraham valuation model, which is based on Benjamin Graham’s formula, to return an estimate of intrinsic value well above the market price.

The next part of the analysis is up to individual investors, and requires discussion of the company’s prospects.  What do you think?  What value would you put on Fifth Third Bancorp (FITB)?  Where do you see the company going in the future?  Is there a company you like better?  Leave a comment on our Facebook page or mention @ModernGraham on Twitter to discuss.

Disclaimer:  The author did not hold a position in Fifth Third Bancorp (FITB) or any of the other companies listed in this article at the time of publication and had no intention of changing that position within the next 72 hours.  Logo taken from the Wikipedia; this article is not affiliated with the company in any manner.

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