Saturday, 19. August 2017  
01.09.2016 05:08
Author: Nic Wright

STOCKS CREEN: Banking Stocks With Solid Upside To Intrinsic Value

 

The banking industry is changing rapidly in terms of technology and client behavior, as on one side smart phone technology and internet have lowered the barriers for new players and fintech companies, and on the other side regulation is still pressuring for less risky business models. Capital requirements for the same underlying revenue-producing assets might have to increase further, while only the extent is still in discussion (i.e. Basel 4 or 'Basel 3 refined').

 

However, global bank stocks particularly in Europe and Japan recovered recently from oversold levels despite having been dogged all year by concerns over profitability in a world of negative interest rates. Increased likelihood of higher interest rates and M&A speculation within the sector might have reminded some investors on the deep discount of banks relative to their book value, despite high leverage ratios, low profitability, and litigation risks.

 

In looking for ideas this week, we screen the sector after a long period of under-performance for stocks with solid upside to our AVM’s intrinsic value estimates.

 

Here are the filter criteria:

1. Market capitalization above 1bn.

2. Upside to fair value on all of our three valuation approaches.

 

Here is our list of stocks matching all criteria in alphabetical order. Company names in the table below are linked to the ANALYZER, our single stock analysis tool. Intrinsic Value Model assumptions can be adapted in the MODELER, our modeling and forecasting environment:

CLICK COMPANY NAME FOR DETAILED STOCK VALUE ANALYSIS

COUNTRY

LAST PRICE

MARKET CAP.

MEAN MULTIPLE UPSIDE [%]

GRAHAM UPSIDE [%]

GREENBLATT UPSIDE [%]

DIVIDEND YIELD [%]

 DNB ASA

 Norway

101.50

165323

5.8

10.9

59.7

4.9

 GOLDMAN SACHS GROUP INC

 United States

169.37

71355

13.3

23.1

8.3

1.6

 HOME CAPITAL GROUP INC

 Canada

29.54

1942

82.0

29.6

107.0

3.3

 HSBC HOLDINGS PLC

 United Kingdom

57.50

147446

20.5

6.4

11.7

6.8

 SOCIETE GENERALE SA

 France

32.94

26600

8.8

4.4

11.7

6.1

 SUMITOMO MITSUI FINANCIAL GR

 Japan

3621.00

5120295

60.3

9.5

75.8

4.2