C Fundamental Research Investment Analysis, Citigroup, Inc.

The Razor's Edge

2-Year Price History

Recent Price
(1/23/2009)
$3.47
52-Week Price
$2.80 - $29.73
Market Capitalization
$18.9 Billion
Dividend Yield
1.20%
Most Recent Dividend
$1.12

About Citigroup, Inc.

Citigroup, Incorporated is considered to operate in the Financial sector. They specifically operate in the Money Center Banks business segment contained within the Banking industry.

A global financial services holding company, which provides a range of financial services to consumer and corporate customers.

A Word Of Caution

The Ockham Research Team has placed an alert on this security because there have been significant developments associated with Citigroup, Inc. (C). Eventually, these externalities may have an impact on our valuation but these recent events have not yet been fully factored into our analysis.

Of course, you may proceed to review our research report for this security, but please be aware that our model may not reflect these significant factors surrounding this company as our data sources are still being updated. This alert shall remain in effect until the situation surrounding this security normalizes substantially.

Therefore, (and as always), check additional sources and available information regarding C before making an investment decision.

Ockham's Rating

We are reaffirming our Undervalued rating for the time being because there have been no major changes in our analysis in the last week. In the following report we will look at the stock versus itself historically, which is clearly useful in order to evaluate if a security is overvalued or undervalued. In addition, we analyze the stock as a member of the Financials sector and the market as a whole to understand the volatility and risk and reward potential.

What can you say about this market? No one likes to see the market going down so rapidly, but in times like these value investors should be cautiously opportunistic, as the market's decline has certainly uncovered some great bargains. We are simply reiterating C's Undervalued rating as of this week, as C's sector has resisted the downturn to some extent. Our analysis of this stock is little changed since last week's report, but please continue reading for further justification of our Undervalued rating.

First, C decreased in price by 0.86% since 01/17/2009 and this does not greatly impact our outlook.

Second, earnings expectations have been revised downward by 135.40% per share since our last report. To the extent that earnings expectations decline faster than the share price, valuations would be further degraded. Should that occur, look for a possible downgrade from us if there isn’t a significant offsetting decline in stock price or an overall change our ranking of the Financials sector.

C Stock Evaluation

We are reiterating our Undervalued rating on C in this week's fundamental analysis. It is important to highlight some of the reasoning for our reiteration of C based on some new information available in the last week. While the price was nearly unchanged in the last week, we saw a downward earnings revision for C. The downward earnings revision is certainly a concern, but at this time, we believe it is prudent to leave the rating unchanged. Please see the following for our full analysis.

C Revenue

For a long time, value investors have used the current share price relative to sales per share levels as an important valuation tool. We utilize a historical weighted average methodology that treats recent years more importantly in the calculation. When looking at C through this framework, we can see that our weighted average historical high and low Price to Sales per share ratios over the last 10 years are 0.94x and 0.55x respectively.

Utilizing this range we can see that C’s current Price to Sales per share ratio of 0.15x is significantly below its average levels historically. In fact, with a current price of $3.47, C is a full 80% below its average Price to Sales ratio at comparable sales levels. This is a rare occurrence and, when taken in context of the other areas of our analysis, can be a strong positive for our outlook for C.

C Cash Earnings

Price to Cash Earnings analysis is inappropriate for this company due to anticipated negative cash flows for this year. Rather than calculating a potentially misleading Price to Cash Earnings analysis, we have chosen to give C a neutral Price to Cash Earnings outlook at this time. However, we should point out that this metric is a significant element in Ockham’s methodology to analyzing the outlook for any company. Therefore, for C, our assessment is now more dependent on the Price to Sales analysis, and investors should be cautious with a company with very limited, if any, positive cash earnings.

C Dividends

A strong dividend payment history is looked upon as a favorable characteristic on a company’s future and potentially can receive a positive Ockham rating. That being said, we don't require dividend payments for company's whose management has elected to forgo them entirely.

When reviewing dividend yields for C, we compare the historic high and low levels over the past, which is similar to our evaluation of Sales and Cash Earnings per share. Paying a dividend is not necessary for any company, but changes in dividend often can lend clues as to the health of the business. A rising dividend is a strong sign for an established company, as it reflects management's confidence in the company. C’s estimated annual dividend is $0.04 resulting in a current dividend yield of 1.15%. The highest dividend yield from C over recent history was 36.72% while the lowest dividend yield was 0.13%. It is never a good sign for a company to pay significantly lower dividends, in this case 93.76% below the median yield. Although, dividends are a relatively small portion of our analysis framework, we still see this as a negative factor.

Peer Comparison

:

Citigroup, Inc. Industry Grouping

(1/23/2009)
Company Ticker Market Cap (Ml) Latest
Price
Price/Cash Earnings Price/Sales 5-Yr. Rev.
Growth Rate
5-Yr.
Avg. ROE.
Current 10-Yr. Range* Current 10-Yr. Range*
Peer Company Averages (not incuding C) 5.59 6.21 » 23.89 1.23 0.72 » 2.95 18.59% 21.42%
*10 year range does not include current year values
The Bank of Nova Scotia BNS $22.5 Billion $22.64 5.61 7.91 » 22.50 1.10 1.10 » 2.56 11.08% 20.42%
Citigroup, Inc. C $18.9 Billion $3.47 -1.00 7.65 » 78.20 0.15 0.17 » 2.70 11.46% 15.52%
Westpac Banking Corp. WBK $18.1 Billion $47.90 4.82 8.85 » 17.90 1.56 1.21 » 2.59 24.38% 21.36%
Banco Itau Holding Financeria SA ITU $14.5 Billion $10.03 7.22 4.06 » 20.43 1.25 0.50 » 3.57 34.59% 26.36%
Banco Bradesco SA ADS BBD $14.1 Billion $9.20 5.44 4.00 » 16.70 1.08 0.27 » 3.25 26.99% 23.56%
Canadian Imperial Bank of Commerce CM $13.6 Billion $35.76 4.88 6.25 » 41.92 1.16 0.52 » 2.78 -4.09% 15.42%
Current
Rating on:
C

Community Discussion

  • TomP556
    Citi is in a real tough fight, and I don't know that they come out on top. I see the "under valued" rating, and I understand your logic, but I think I would steer clear until the banking mess works itself out.
    11/12/2008
  • Lou
    Lou
    good writeup
    11/12/2008
  • Lou
    Lou
    Great report will it get back to 50
    11/12/2008

Key Fundamentals

C - Citigroup, Incorporated Fundamentals
Price (1/23/2009) $3.47
Volume (1/23/2009) 263.1 Million
10 Day Average Volume 345.7 Million
13 Week Price Range $2.80 - $14.81
52 Week Price Range $2.80 - $29.73
LTM Revenue $106.7 Billion
 
Shares Outstanding (12/2008) 5.4 Billion
Market Capitalization $18.9 Billion
Shares Held By Institutions 3.5 Billion
Insitutional Holders 1,569
% Shares Held By Institutions 64.60%
Earnings Per Share (EPS) ($0.42)
P/E Ratio n/a
Book Value Per Share $18.10
 
Gross Margin n/a%
Quarterly Dividend 0.04
Dividend Yield 1.20%
Beta 1.60
Fiscal Year Ends December