Cullen/Frost Bankers Inc.’s stock price has surged to a price of $100.08 today. With their 7.1% increase, CFR shares outpaced both the S&P 500 and Dow Industrial composite indices by 1.0%, but are still well below their 52 week high of $160.6. Over the last 12 months, Cullen/Frost Bankers is down 28.9%, and has underperformed the S&P 500 by 27.0%. Now, the mid-cap Finance company is 18.58% below its average target price of $122.92 and has an average analyst rating of buy.
Cullen/Frost Bankers's trailing 12 month price to earnings (P/E) ratio is 10.6, which is its share price divided by its trailing earnings per share (EPS) of $9.45. The company has a forward P/E ratio of 10.7 based on its forward EPS of $9.37 -- which is an estimate of future earnings provided by management. The P/E ratio tells us how much investors are willing to pay for each dollar of the company's net earnings from its sales operations. By way of comparison, the average P/E ratio of the Finance sector is 14.34, but a company's price can remain stable for a long time even if it is over or undervalued.
An alternative form of measuring a company's valuation is to focus on its Price to Book (P/B) Ratio, or the company's market price per share divided by its book value per share. The book value refers to the present value of the company if it were to be liquidated today (i.e. selling all assets and paying off all debts). Cullen/Frost Bankers's P/B ratio indicates that the market value of the company exceeds its book value by a factor of 2.0, but is still below the average P/B ratio of the Finance sector, which stands at 1.57.
CFR's average free cash flow over the last few years is $514.68 Million, which represents the sum of inflows and outflows of cash from all sources, including capital expenses.. This is the pool of liquidity that the company can use to reinvest in its business or pay out to its equity investors in the form of a dividend. Over the last twelve months investors in Cullen/Frost Bankers have enjoyed a dividend yield of 3.6%.
Since it has a a very low P/E ratio, an average P/B ratio, a steady stream of strong cash flows, and consistent net margins, Cullen/Frost Bankers is probably undervalued at current prices. Make sure to complement this brief quantitative review with a qualitative analysis of your own!