Banking company Mizuho Financial is standing out today, surging to $5.08 and marking a 3.7% change. In comparison the S&P 500 moved only 1.0%.
MFG currently sits within range of its analyst target price of $5.2, which implies that its price may remain stable for the near future. Over the last year, Mizuho Financial shares have outperformed the S&P 500 by 17.8%, with a price change of 49.9%.
Mizuho Financial Group, Inc., together with its subsidiaries, engages in banking, trust, securities, and other businesses related to financial services in Japan, the Americas, Europe, Asia/Oceania, and internationally. The company is included in the financial services sector, which includes a wide variety of industries such as credit services, mortgage, banking, and insurance. Owing to this variety and the fast pace of innovation within these industries, investors may struggle to make sense of this sector.
As evidenced by the financial meltdown of 2008, seemingly healthy financial services companies — from insurers to investment banks — may see their market value plunge to zero in a matter of months. While the financial crash was likely a once-in-a-generation event, it highlights the volatility that is inherent to the sector. Financial innovation creates opportunities, but also new types of risk that investors and even the companies themselves may not fully understand.
Mizuho Financial's trailing 12 month P/E ratio is 11.8, based on its trailing EPS of $0.43. The company has a forward P/E ratio of 3.7 according to its forward EPS of $1.39 -- which is an estimate of what its earnings will look like in the next quarter.
As of the third quarter of 2024, the average Price to Earnings (P/E) ratio for US finance companies is 20.04, and the S&P 500 has an average of 29.3. The P/E ratio consists in the stock's share price divided by its earnings per share (EPS), representing how much investors are willing to spend for each dollar of the company's earnings. Earnings are the company's revenues minus the cost of goods sold, overhead, and taxes.
Another key to assessing a company's health is to look at its free cash flow, which is calculated on the basis of its total cash flow from operating activities minus its capital expenditures. Capital expenditures are the costs of maintaining fixed assets such as land, buildings, and equipment. From Mizuho Financial's last four annual reports, we are able to obtain the following rundown of its free cash flow:
| Date Reported | Cash Flow from Operations ($ k) | Capital expenditures ($ k) | Free Cash Flow ($ k) | YoY Growth (%) |
|---|---|---|---|---|
| 2023 | -3,460,502,000 | 256,475,000 | -3,716,977,000 | -74.07 |
| 2022 | -2,034,549,000 | 100,783,000 | -2,135,332,000 | -4021.39 |
| 2021 | 32,516,000 | 84,327,000 | -51,811,000 | 95.96 |
| 2020 | -1,230,661,000 | 52,234,000 | -1,282,895,000 | 65.65 |
| 2019 | -3,660,970,000 | 73,768,000 | -3,734,738,000 | -188.71 |
| 2018 | -1,212,179,000 | 81,427,000 | -1,293,606,000 |
- Average free cash flow: $-2035893166666.7
- Average free cash flown growth rate: -23.5 %
- Coefficient of variability (the lower the better): 0.0 %
If it weren't negative, the free cash flow would represent the amount of money available for reinvestment in the business, or for payments to equity investors in the form of a dividend. While a negative cash flow for one or two quarters is not a sign of financial troubles for MFG, a long term trend of negative or highly erratic cash flow levels may indicate a struggling business or a mismanaged company.
Value investors often analyze stocks through the lens of its Price to Book (P/B) Ratio (market value divided by book value). The book value refers to the present value of the company if the company were to sell off all of its assets and pay all of its debts today - a number whose value may differ significantly depending on the accounting method.
Mizuho Financial's P/B ratio of 0.0 indicates that the market value of the company is less than the value of its assets -- a potential indicator of an undervalued stock. The average P/B ratio of the Finance sector was 1.86 as of the third quarter of 2024.
With a Very low P/E ratio, no published P/B ratio, and negative cash flows with a downwards trend, we can conclude that Mizuho Financial is probably overvalued at current prices. The stock presents mixed growth prospects because of its weak net margins with a positive growth rate, and a negative PEG ratio.
