Capital One Financial may be undervalued with poor growth indicators, but the 19 analysts following the company give it an rating of hold. Their target prices range from $84.0 to $145.0 per share, for an average of $110.11. At today's price of $99.28, Capital One Financial is trading -9.84% away from its average target price, suggesting there is an analyst consensus of some upside potential for the stock.
Capital One Financial Corporation operates as the financial services holding company for the Capital One Bank (USA), National Association; and Capital One, National Association, which provides various financial products and services in the United States, Canada, and the United Kingdom. Based in McLean, VA, the large-cap Finance company has 54,200 full time employees. Capital One Financial has provided a 2.5% dividend yield over the last 12 months.
Capital One Financial has a trailing twelve month P/E ratio of 7.6, compared to an average of 14.34 for the Finance sector. Considering its EPS guidance of $13.28, the company has a forward P/E ratio of 7.5.
The average compound growth rate of the company's last 6 years of reported earnings per share is 1.8% (the company doesn't issue forward EPS guidance). On this basis, the company's PEG ratio is 4.13, which suggests that it is overpriced.
On the other hand, the market is potentially undervaluing Capital One Financial in terms of its book value because its P/B ratio is 0.77. In comparison, the sector average P/B ratio is 1.57. The company's shares are currently -53.5% below their Graham number, indicating that its shares have a margin of safety.
The question is, why does Capital One Financial have a bad rating if it is apparently undervalued in terms of traditional metrics? One reason could be the company's disappointing rate of margin growth, which in the analysts' opinion, will continue in coming years.
| 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | |
|---|---|---|---|---|---|---|
| Revenue (MM) | $27,176 | $28,513 | $26,033 | $25,769 | $31,237 | $37,278 |
| Interest Income (MM) | $22,875 | $23,340 | $22,913 | $24,171 | $27,114 | $28,499 |
| Operating Margins | 27.0% | 24.0% | 12.0% | 61.0% | 30.0% | 18.0% |
| Net Margins | 22.0% | 19.0% | 10.0% | 48.0% | 24.0% | 14.0% |
| Net Income (MM) | $6,025 | $5,546 | $2,717 | $12,394 | $7,360 | $5,317 |
| Depreciation & Amort. (MM) | $2,396 | $3,339 | $3,501 | $3,481 | $3,210 | $3,163 |
| Earnings Per Share | $11.82 | $11.05 | $5.18 | $26.94 | $17.91 | $13.16 |
| EPS Growth | n/a | -6.51% | -53.12% | 420.08% | -33.52% | -26.52% |
| Diluted Shares (MM) | 483 | 470 | 459 | 444 | 393 | 356 |
| Free Cash Flow (MM) | $12,104 | $15,752 | $15,989 | $11,612 | $12,875 | $16,328 |
| Capital Expenditures (MM) | $874 | $887 | $710 | $698 | $934 | $952 |
| Net Current Assets (MM) | -$266,308 | -$245,533 | -$258,243 | -$365,464 | -$402,464 | -$412,030 |
| Long Term Debt (MM) | $69,636 | $68,480 | $54,330 | $58,105 | $65,366 | $66,048 |
