No Bargains in these 5 Big Banks

Christopher is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.

A lot of bank stocks have been beaten down the last few months so the question has to be have any of them become oversold? I analyzed five financial stocks to see if I could find any that are undervalued. With earnings reporting just around the corner, are any of them a good buy right now?

We start off with Citigroup, Inc. (NYSE: C)

, whose recent price around $30 is near the bottom of its 52-week trading range of $29.88 to $49.60, with a market cap of $89.87 billion. The price to earnings ratio is 8.20 while the earnings per share is $3.75. The main problem with Citigroup is it is facing into a monstrous headwind. Operational cash flow is good but it is still dealing with massive problems from its financial investment operations tied to the real estate crash and the shambling recession. The last two quarters it has averaged a -$34 billion cash flow, which continues to drag down the company's performance. Its book value stands at $60.56 per share but with their financial investment problems that number seems inflated to true value. Forecasters are expecting disappointing quarterly results. With a dividend of $0.04 yielding a pathetic 0.1%, unless you are the ultimate bottom feeder, it is better to keep a wait and see attitude with Citigroup until the company shows signs of solving its investment black hole.

Similarly, Bank of America (NYSE: BAC) has been beaten down with a recent price around $7 at the lower end of its 52-week trading range of $4.90 to $15.31. It shows, negative earnings per share of -$0.31 with no meaningful price earnings. Investors have short interest holdings at 157 million shares and at first blush, such an astronomical number might send warning flags. But compared to Bank of America's daily value of over 330 million shares, those short positions are not as alarming as they seem with the company's market cap of $66 billion. It carries a tiny dividend of $0.04 making for a yield of just 0.59%. Losses have been accelerating since the end of 2008, with almost -$3.6 billion in 2010 and general expectations are for higher losses. With the price to cash flow being a horrific -21.90 the company has been charged by observers of having the worst cost structure in the industry. This looks like another bank that all but the most adventurous investors should avoid for now.

In comparison with Bank of America, Barclays PLC (NYSE: BCS) has only about 10 million shares shorted, but with a daily average volume of only 5 million shares, there has to be more worry here because Barclays has the lowest market cap of the group at about $1 billion. There is a lot more chance for damage to be done with their recent price of around $12.37 off a 52-week range of $8.38 to $21.69. Shareholder ratios look comfortable here with earnings per share are $2.00 and a tiny price to earnings ratio of 6.18, while an annual dividend of $0.26 awards the second highest yield of this group at 2.11%. But it carries a small price to book ratio of 0.46 and the return on assets is only 0.20, half the industry average. With the British bank's exposure to the European economic vortex this looks like another investment that does not pass muster.

The last of our beaten down stocks is Goldman Sachs (NYSE: GS)With a recent price at around $98.96, it's also at the lower end of its 52-week trading range of $84.27 to $175.34. It boasts a market cap of $46 billion with a $6.36 earnings per share and a price earnings ratio of 15.56. It has a tiny earnings to growth ratio of 0.451, and an annualized dividend of $1.40 yielding 1.38%. Many forecasters are predicting Goldman Sachs to suffer decreasing earnings growth, and the consensus estimate is that the previous quarterly estimate of $2.74 may only be around $1.73. In fact, unless it posts a big earnings per share bump in January earnings per share will be around a 65% drop since 2010. There is a lot of downside here and not yet a lot of upside. This looks like another pass.

With the down beaten banks looking like a wasteland of opportunity let's compare them to Fifth Third Bancorp (NASDAQ: FITB). Fifth Third's recent price of around $14.03 is near the upper end of its 52-day trading range of between $9.13 and $15.57. The basic numbers show an earnings per share of $1.18 and a price to earnings ratio of 11.89. The earnings to growth ratio comes out at 2.175. The dividend comes in highest of the group, paying out $0.32 for a yield of 2.31%. It carries a book value of $13.73 per share and a cash flow of $1.15 per share. Solid numbers, but certainly no bargain. In fact it seems fairly priced for now.

So with this group of bank stocks there seems to be no bargains right now. You can get the first four at a good price but you are likely to ride a roller coaster for the near term while each solves their internal and market problems. For those who are extremely risk tolerant Bank of America seems to have the best upside, if they can get do something to improve their cost structure, but it would be wise to wait until after the January earnings reports to see what happens.

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Source: http://beta.fool.com/dividendkings/2012/02/08/no-bargains-these-5-big-banks/1785/

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