The market has rallied impressively over the past several months, with the S&P 500 index reaching all-time highs that confirm a new bull market is underway in stocks. With this recent rally, some stock valuations may be stretched, making it harder to find deals. Good news for you: There are still plenty of deals to be had in the market today.
Bank stocks have been slow to recover amid the high interest rate environment, which has been a headwind to businesses. However, there are at least three bank stocks that still trade at incredibly cheap valuations and could be poised to take off.
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1. Citigroup
Citigroup (NYSE: C) is one of the largest banks in the U.S. but has struggled in recent years as its wide-ranging worldwide business endeavors has spread it too thin. Not only that, but a few years ago, the bank was fined $400 million for deficiencies in internal controls, risk management, and data governance. As a result, Citigroup’s performance struggled compared with that of its banking peers.
Because of its recent history of underperformance, Citigroup trades at a dirt cheap 33% discount to its tangible book value. In comparison, Bank of America and Wells Fargo trade at a 44% and 54% premium to book value, respectively.
Citigroup’s cheap valuation is one aspect that makes it appealing. However, the guidance of CEO Jane Fraser, if implemented, could give Citigroup a higher valuation. Fraser took over as CEO in 2021 and laid out plans to eliminate less profitable operations while leaning into those that will boost its efficiency. As part of this move, it announced it would wind down 13 global consumer franchises, reduce its workforce, consolidate operations, and streamline its business.
Some analysts are quite optimistic about its strategy. For example, Wells Fargo analyst Mike Mayo believes Citi’s stock price could reach $100 over the next three years. While Citigroup has its work cut out for it, its cheap valuation provides some margin of safety and makes it look like a good value stock to buy today.
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2. Goldman Sachs
Rising…
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