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Citigroup Inc Valuation – March 2018 $C

Company Profile (obtained from Marketwatch): Citigroup, Inc. is a global financial services holding company, which engages in the provision of a range of financial products and services including consumer banking and credit, corporate and investment banking, securities brokerage, trade and securities services, and wealth management. It operates through the Citicorp and Citi Holdings segments. The Citicorp segment consists of the company’s Global Consumer Banking and Institutional Clients Group businesses; as well as corporate and other functions. The Citi Holdings segment comprises of Citigroup’s other businesses and portfolios of assets. The company was founded on October 8, 1998 and is headquartered in New York, NY.

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C data by YCharts

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of C – 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 $194,810,100,807 Pass
2. Earnings Stability Positive EPS for 10 years prior Fail
3. Dividend Record Dividend Payments for 10 years prior Fail
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end -1024.10% Fail
5. Moderate PEmg Ratio PEmg < 20 24.62 Fail
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 0.96 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 Fail
2. Dividend Record Currently Pays Dividend Pass
3. Earnings Growth EPSmg greater than 5 years ago Fail

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.99
MG Growth Estimate -0.51%
MG Value $22.37
Opinion Overvalued
MG Grade D+
MG Value based on 3% Growth $43.39
MG Value based on 0% Growth $25.44
Market Implied Growth Rate 8.06%
Current Price $73.68
% of Intrinsic Value 329.42%

Citigroup Inc does not satisfy the requirements of either the Enterprising Investor or the more conservative Defensive Investor. The Defensive Investor is concerned with the insufficient earnings stability or growth over the last ten years, and the poor dividend history, and the high PEmg ratio. The Enterprising Investor has concerns regarding the lack of earnings stability or growth over the last five years. As a result, all value investors following the ModernGraham approach should explore other opportunities at this time or proceed cautiously with a speculative attitude.

As for a valuation, the company appears to be Overvalued after seeing its EPSmg (normalized earnings) decline from $3.1 in 2014 to an estimated $2.99 for 2018. This level of demonstrated earnings growth does not support the market’s implied estimate of 8.06% 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 below the price.

At the time of valuation, further research into Citigroup Inc revealed the company was trading below its Graham Number of $97.07. The company pays a dividend of $0.96 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 24.62, which was above the industry average of 20.84.

Citigroup Inc scores quite poorly in the ModernGraham grading system, with an overall grade of D+.

Stage 3: Information for Further Research

Graham Number $97.07
PEmg 24.62
PB Ratio 0.96
Dividend Yield 1.30%
TTM Dividend $0.96
Number of Consecutive Years of Dividend Growth 3

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2017
Long-Term Debt & Capital Lease Obligation $236,709,000,000
Total Assets $1,842,465,000,000
Intangible Assets $27,402,000,000
Total Liabilities $1,641,725,000,000
Shares Outstanding (Diluted Average) 2,606,100,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $5.93
Dec2017 -$2.98
Dec2016 $4.72
Dec2015 $5.40
Dec2014 $2.20
Dec2013 $4.34
Dec2012 $2.44
Dec2011 $3.63
Dec2010 $3.54
Dec2009 -$8.00
Dec2008 -$56.30
Dec2007 $7.20
Dec2006 $43.10
Dec2005 $47.50
Dec2004 $32.60
Dec2003 $34.20
Dec2002 $29.40
Dec2001 $27.20
Dec2000 $26.20
Dec1999 $21.70
Dec1998 $13.10

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.99
Dec2017 $1.93
Dec2016 $4.19
Dec2015 $3.82
Dec2014 $3.10
Dec2013 $2.76
Dec2012 -$2.33
Dec2011 -$6.47
Dec2010 -$8.38
Dec2009 -$7.33
Dec2008 $0.28
Dec2007 $30.02
Dec2006 $40.07
Dec2005 $37.10
Dec2004 $31.24
Dec2003 $29.62
Dec2002 $26.06

Recommended Reading:

Other ModernGraham posts about the company

Benjamin Graham Would Love These 10 Companies Today
Citigroup Inc Valuation – July 2016 $C
5 Companies for Value Investors with a High Beta – July 2016
Stocks Trading Below Their Graham Number – June 2016
10 Companies Benjamin Graham Would Invest In Today – June 2016

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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.

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