A strong performer from today's afternoon trading session is Cullen/Frost Bankers, whose shares rose 3.7% to $107.8 per share. For those of you thinking about investing in the stock, here is a brief value analysis of the stock using the company's basic fundamental ratios.
A Very Low P/E Ratio but Trades Above Its Graham Number:
Cullen/Frost Bankers, Inc. operates as the bank holding company for Frost Bank that provides commercial and consumer banking services in Texas. The company belongs to the Finance sector, which has an average price to earnings (P/E) ratio of 14.34 and an average price to book (P/B) ratio of 1.57. In contrast, Cullen/Frost Bankers has a trailing 12 month P/E ratio of 10.8 and a P/B ratio of 2.09.
P/E rations can be placed into context by dividing them by the firm's expected 5-year EPS growth rate, which gives us its Price to Earnings Growth (PEG) ratio. Cullen/Frost Bankers's PEG ratio is 1.06, which tells us the company is fairly valued in terms of growth. PEG ratios under 1 are considered an indicator of undervalued growth, but we need to keep in mind that many successful companies with excellent share performance have maintained much higher PEG ratios.
As always, a quantitative approach to a stock should be supplemented with a look at qualitative factors, such as the competence of its management team, quality of its corporate culture, and the wide variety of social and economic factors that can impact the success of its product.
The Business Runs With Low Leverage Levels:
| 2019-12-31 | 2020-12-31 | 2021-12-31 | 2022-12-31 | |
|---|---|---|---|---|
| Revenue (MM) | $1,368 | $1,441 | $1,372 | $1,696 |
| Interest Income (MM) | $1,004 | $976 | $985 | $1,291 |
| Net Margins | 32.43% | 22.97% | 32.3% | 34.15% |
| Net Income (MM) | $444 | $331 | $443 | $579 |
| Depreciation & Amort. (MM) | -$1 | -$1 | -$1 | -$0 |
| Earnings Per Share | $6.84 | $5.1 | $6.76 | $10.0 |
| EPS Growth | n/a | -25.44% | 32.55% | 47.93% |
| Diluted Shares (MM) | 63 | 63 | 64 | 64 |
| Free Cash Flow (MM) | $427 | $429 | $582 | $620 |
| Capital Expenditures (MM) | -$207 | -$95 | -$66 | -$103 |
| Long Term Debt (MM) | $235 | $235 | $222 | $222 |
| Net Debt / EBITDA | -2.12 | -7.57 | -11.06 | -5.92 |
Cullen/Frost Bankers benefits from a steady stream of strong cash flows, low leverage, and growing revenues and decreasing reinvestment in the business. The company's financial statements show consistent net margins with a stable trend and positive EPS growth.
