3 Reasons to Let Go of CFG and One Alternative Stock Worth Buying

Citizens Financial Group: Recent Performance and Investor Considerations

Over the past half-year, Citizens Financial Group has delivered a 24% return, outperforming the S&P 500 by 17.5%. The stock now trades at $63.62 per share, prompting investors to consider their next move.

Is this a good moment to add Citizens Financial Group to your holdings, or should you exercise caution?

Why We Believe Citizens Financial Group May Lag Behind

While we’re pleased to see shareholders benefit, we’re not currently enthusiastic about Citizens Financial Group. Here are three reasons why we’re not optimistic about CFG, along with a suggestion for a more attractive alternative.

1. Revenue Growth Has Been Underwhelming

Banks typically generate income through interest earned on loans versus deposits and through various service fees, ranging from basic account charges to complex investment banking fees.

However, Citizens Financial Group’s revenue has grown at an annualized rate of just 3.6% over the past five years, which falls short of industry expectations.

2. Net Interest Income Growth Trails the Industry

Net interest income is closely watched by investors because of its stability, while one-off fees are generally seen as less reliable.

Citizens Financial Group’s net interest income has expanded at only a 5% annualized rate over the last five years, significantly lagging behind the broader banking sector.

3. Earnings Per Share Show Minimal Progress

We monitor long-term earnings per share (EPS) trends to gauge whether a company’s growth is translating into profitability.

Citizens Financial Group’s EPS has increased at a modest 3.5% annual rate over the past five years, mirroring its slow revenue growth. On a positive note, this suggests that additional sales have contributed to profits.

Our Verdict

We appreciate companies that contribute to economic growth, but in the case of Citizens Financial Group, we prefer to remain observers. Despite its recent outperformance and a price-to-book ratio of 1× (or $63.62 per share), much of the positive outlook appears already reflected in the stock price. We believe there are more compelling investment opportunities available. Consider exploring the world’s leading software company instead.

Preferred Alternatives to Citizens Financial Group

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