Capital One Financial Corporation’s COF shares increased 35.1% in the last one year, outpacing the 31.8% gain for the Zacks categorized Financial - Consumer Loans industry.
The company’s solid balance sheet and revenue strength make it well poised for growth in the future. While its future prospects look encouraging, one should not get too excited about the stock given its elevated expenses and deteriorating asset quality.
Moreover, the stock has witnessed its current year estimates revising nearly 1% downward over the past 30 days. As a result, the stock currently carries just a Zacks Rank #3 (Hold).
Going by the fundamentals, Capital One has witnessed its revenues growing at a six-year (2011–2016) CAGR of 9.4%. Moreover, the company’s strength in its credit card and online banking business will likely continue to drive top-line growth.
Capital One has an efficient capital deployment strategy in place. With a solid balance sheet position, the company is expected to continue enhancing shareholder value.
However, the company’s deteriorating asset quality is an area of concern. Moreover, due to losses in auto portfolio and U.S. card business, credit quality is expected to remain under stress for some time.
Also, the company’s expenses have been increasing at a CAGR of 4% for the last five years (2012–2016). In fact, with increasing loan growth opportunities, marketing expenses are likely to remain elevated.
Some better-ranked stocks in the finance space include Texas Capital Bancshares, Inc. TCBI, Bank of America Corp. BAC and U.S. Bancorp USB.
Texas Capital has witnessed an upward earnings estimate revision of 6.8% for the current year, in the past 60 days. Its share price has increased 69.7% in the last six months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Bank of America carries a Zacks Rank #2 (Buy). For the current year, in the past 60 days, its Zacks Consensus Estimate was revised 6.1% upward. Its share price has increased 59% in the last six months.
U.S. Bancorp also carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 2.1% for the current year, in the past 60 days. Its share price increased 25.5% in the last six months.
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