Search Results for: 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 (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 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:

Balance Sheet – December 2014

Earnings Per Share

Earnings Per Share – ModernGraham 

Dividend History

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 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 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.

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 (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 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:

Balance Sheet – 6/30/2014

Earnings Per Share

Earnings Per Share – ModernGraham 

Dividend History

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.

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 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 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:

Balance Sheet – 3/31/2014

Earnings Per Share

Earnings Per Share – ModernGraham 

Dividend History

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.