Citigroup: Strong Cash Flow Will Push Stock Higher
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Citigroup (NYSE: C), an America-based multinational financial services corporation was formed with one of the largest mergers in history – the synergy of financial Conglomerate Travelers Group with banking giant Citicorp. Citigroup has been around for two centuries and is currently celebrating its 200th anniversary. The fact that the stock is celebrating its 200th anniversary this year has recently allowed it positive investor sentiment. Citigroup is known to possess the world’s largest financial networks, with a little over 16,000 stretched across 140 countries. Moreover, the company employs almost 260,000 staff to cater to a staggering 200 million customer accounts spread across five continents.
In the three years since the economic crisis, Citigroup has come out on top with impressive market performance in the last five fiscal quarters, growing market share and promising signs of future growth. Learning from its past mistakes, the stock has recently acted more wisely by taking precautionary measures – it has built a massive cash reserve of nearly $248 billion. Citigroup has a massive market capitalization of nearly $102 billion with an average trading volume of around $45 million which easily surpasses that of most of its peers. Currently, the stock is following an upward trend which has largely been the result of favorable investor sentiment that the business has enjoyed owing to an impressive performance in the previous financial year.
The stock has recently impressed investors with a positive upward movement that has sent the trading price spiraling up to as high as $47 in 52 weeks. This is a promising sign for investors, especially when compared with the stock’s performance in previous months amidst predominantly sluggish market activity. In the current financial year, the stock has gained considerably owing to aggressive trading and positive investor sentiment. This has provided Citigroup with the impetus to drive towards positive growth and the stock has responded with a current trading price of around $34 a share.
Citigroup has traditionally enjoyed a high price to earnings ratio of 9.66 which is really impressive when compared with industry standards. The stock also has a healthy dividend history with a dividend yield of 0.11%. Moreover, the stock last paid $0.01 in dividends to investors on earnings per share of $3.60. Unless another major economic downturn is imminent in the upcoming fiscal quarters, one can easily speculate that Citigroup is poised for growth and increased market share in the current year.
Quite recently, the stock has been seen redirecting its strategic focus to core operations while divesting all its non-core and unprofitable investment ventures and adopting strategic cost-cutting measures. This has largely been the reason for Citigroup Australia’s impressive performance in the first fiscal quarter of 2011 where net profit margins have risen by an overwhelming 22% compared to figures for the previous year. Moreover, Citigroup has also enjoyed favorable investor and market sentiment owing to the fact that it has reached the all-important milestone of completing 200 years in business.
As a result, the stock has led this year’s rally by benefitting tremendously from the recent swing in the financial sector. Moreover, Citigroup has come upon the strategic decision to sell more than half of its stake in the Akbank TAS, Turkey’s largest bank. This strategic development is among some of the major divestment initiatives that Citigroup has adopted in India and China in order to meet its capital requirements.
Among Citigroup’s leading competitors is Bank of America (NYSE: BAC), with a massive market capitalization of nearly $99.5 billion and an average trading volume of $290 million that easily overshadows most of its competitors in the market, it can be said that Bank of America is the traditional arch-rival of Citigroup. The stock has performed reasonably well in the market over the last 3 fiscal quarters, reporting sizable gains. However, the stock has been known to 'play it safe', where Citigroup is known to make clever investment decisions to boost growth margins. The trading price of the stock currently poised at a little above $9 which is not impressive when compared with that of Citigroup. Moreover, the stock last paid dividends of $0.01 per share to investors, which is exactly the same as its earnings per share figures. This has forced some investors to approach the business with skepticism, seeing how the stock may have to rely on its reserves to meet its dividend commitments in the wake of unfavorable market conditions. Citigroup on the other hand seems to be on a rampage.
HSBC Holdings (NYSE: HBC) is another high-ranking competitor among the largest banks in the world with a market capitalization of more than $155 billion and an average trading volume of almost $3 million. Although HSBC registered year-on-year quarterly earnings growth of -27.20%, its impressive divided history, reasonably stable trading price, and favorable market sentiment have allowed the business to gain in recent months. As a result, HSBC has the capacity to pose a threat to Citigroup.
JPMorgan Chase (JPM) is ranked as the largest global banking business in terms of capital and the stock has a massive market capitalization of nearly $167 billion and an average trading volume of more than $32.5 million. The bank has posted impressive financial indicators over the last 3 fiscal quarters with a price to earnings ratio of 9.90 and dividend payout ratio of $0.30 against earnings per share of nearly $4.50. With a dividend yield of 2.71%, the business has recently enjoyed positive investor sentiment in predominantly sluggish market conditions. However, the stock has registered a sharp decline in the financial sector which is contrary to the performance of two of its major competitors, Citigroup and Bank of America. This indicates that Citigroup has a higher resilience to negative market conditions and unfavorable investor sentiment compared to JPMorgan.
With the above analysis, I believe that Citigroup is ready to climb higher on strong cash flow in the first fiscal quarter of 2012. It is also evident that the stock is in prime position to capitalize on the impetus that it has developed on impressive past performances. As a result, I rate Citigroup as a more viable investment option compared to other major competitors operating in the industry.
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