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

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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

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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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