Are Analysts Underestimating Capital One Financial (COF)?

Capital One Financial may be undervalued with poor growth indicators, but the 20 analysts following the company give it an rating of hold. Their target prices range from $90.0 to $159.0 per share, for an average of $132.65. At today's price of $127.85, Capital One Financial is trading -3.62% 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 1.9% dividend yield over the last 12 months.

Capital One Financial has a trailing twelve month P/E ratio of 9.6, compared to an average of 12.38 for the Finance sector. Considering its EPS guidance of $13.87, the company has a forward P/E ratio of 9.2.

The average compound growth rate of the company's historical and projected earnings per share is 2.3%. On this basis, the company's PEG ratio is 3.79, 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 1.0. In comparison, the sector average P/B ratio is 1.58. The company's shares are currently -37.8% below their Graham number, indicating that its shares have a margin of safety.

If analysts are giving the the company a mediocre rating despite its low valuation point, it could be related to the company's disappointing cash flows. They might also believe that Capital One Financial's negative margin growth trend will continue.

2018 2019 2020 2021 2022 2023
Revenue (MM) $27,176 $28,513 $26,033 $25,769 $31,237 $39,951
Revenue Growth n/a 4.92% -8.7% -1.01% 21.22% 27.9%
Interest Income (MM) $22,875 $23,340 $22,913 $24,171 $27,114 $28,919
Operating Margins 27% 24% 12% 61% 30% 17%
Net Margins 22% 19% 10% 48% 24% 14%
Net Income (MM) $6,015 $5,546 $2,714 $12,390 $7,360 $5,413
Depreciation & Amort. (MM) $2,396 $3,339 $3,501 $3,481 $3,210 $3,271
Earnings Per Share $11.82 $11.05 $5.18 $26.94 $17.91 $13.41
EPS Growth n/a -6.51% -53.12% 420.08% -33.52% -25.13%
Diluted Shares (MM) 3 2 1 444 393 383
Free Cash Flow (MM) $12,104 $15,752 $15,989 $11,612 $12,875 $20,642
Capital Expenditures (MM) $874 $887 $710 $698 $934 $990
Total Debt (MM) $49,503 $48,383 $39,871 $42,266 $47,832 $48,725
Net Debt / EBITDA 3.74 3.42 -0.1 1.05 1.33 0.34
The above analysis is intended for educational purposes only and was performed on the basis of publicly available data. It is not to be construed as a recommendation to buy or sell any security. Any buy, sell, or other recommendations mentioned in the article are direct quotations of consensus recommendations from the analysts covering the stock, and do not represent the opinions of Market Inference or its writers. Past performance, accounting data, and inferences about market position and corporate valuation are not reliable indicators of future price movements. Market Inference does not provide financial advice. Investors should conduct their own review and analysis of any company of interest before making an investment decision.