Banking Stocks: Capital One Rallies to New Highs

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  • 10 Months ago
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Banking Stocks: CapitalOne Rallies to New Highs

Capital One Financial Corp. (NYSE: COF) is a diversified financial services holding company that was incorporated in 1994 and is headquartered in McLean, Virginia USA.  COF offers a range of services and financial products to consumers, small businesses, and commercial. It operates through its subsidiaries, Capital One and Capital One Bank USA.

The company is part of the critical banking sector, which has come under greater scrutiny over the last few weeks as President Donald Trump’s economic  plans start to take shape.  Capital One competes with counterparts like Discover Card and American Express, and these stocks can be traded individually or through and online trading platform that offers access to sector ETFs.

COF:  Corporate Earnings Results

On January 24, COF reported fourth quarter earnings-per-share of $1.45, which was well below the Reuters analyst survey, which showed an average expectation of $1.60.  Capital One’s net revenue for the quarter was $6.566 billion versus expectations of $6.667 billion.

Quarterly provisions for credit losses increased 10% to $1.8 billion, and the company’s quarterly net interest margins came in at 6.85% (up 6 basis points from the previous quarter.)  Fourth quarter net interest income was $5.447 billion versus $4.961 billion expected.  

Currently, analysts are expecting sales of $27.345 billion and earnings-per-share of $7.92 for the year ending December 2017.  On average, analysts on Reuters are expecting $8.91 in per-share earnings for the year ending June 2018 and full-year revenues of $28.873 billion for the period.

Capital One Strategy Changes

In November, Capital One released statements saying the company’s president, Ryan Schneider, will be leaving his current position to take on the role of CEO of another publicly traded company. 

Earlier in October, a judge dismissed a lawsuit by a shareholder accusing board members of failing to properly oversee the bank’s compliance with Federal anti-money-laundering laws.  Ratings agency Fitch has affirmed the Capital One rating at ‘A-/F1’ with a stable outlook.

Capital One Stock Prices

One year ago, Capital One stock was trading around $66. per share  COF made a low of $58 in June. At present, it is trading near its highs at $91 as most stocks in the banking sector are now seen surging to new long-term highs.

COF is a regular dividend payer, paying $0.40 a share quarterly dividend. At current prices, the stock is yielding 1.74%, while its payout ratio is about 17.58%.  That is, the company distributes roughly 17.58% of its profit to investors. COF’s trailing-twelve-month earnings-per-share is $6.91.

Stock Market Valuations

At the current prices, the stock is showing a price-to-earnings ratio of 13.28x which is low compared to the industry average of 40.18x Capital One Financial Corp has given a 9.23% annualized return on equity over the last 5 year while the industry average is 12.91% during the same period.  

Similarly, the stock gives a 1.32% annualized return on assets over the last five years (compared to industry average of 1.89%). Sales have a growth rate of 8.84% annualized in last 5 years despite the industry growth rate of 20.95% during the same period. But the analysts are optimistic about the stock and recommending it as an “outperformer” on Reuters.

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