Citigroup, one of the “too big to fail” banks is a very interesting stock to watch at the moment in my opinion. Over the past three months, we've seen relatively solid gains with one exception; Citigroup declined leading up to its recent earnings report. Nonetheless, gains continued; and in my opinion, this is a well deserving trend. Today, we're going to look at two important valuation metrics that show that Citigroup stock is undervalued. We'll also talk about what to expect moving forward and how binary options traders can ride the trends to profits.
Citigroup Is Grossly Undervalued
One of the key factors in deciding whether or not a stock is likely to grow is its current valuation. When a stock is undervalued, it means that the stock is trading at a discount and likely to grow. Adversely, when a stock is overvalued, it is trading at a premium and will meet more resistance in the market. Of course, there are a few stocks that seem to be immune to these rules; like Netflix which is currently valued at more than 230 times earnings! Nonetheless, for the most part, this is a very solid statistic to follow. In general, a healthy stock will trade at between 12 and 15 times earnings. However, according to NASDAQ, Citigroup is currently trading at below 10 times earnings; which equates to an incredible discount.
Another strong way to assess the value of a stock is comparing its book value to its share value. Currently, Citigroup shares are trading around $59 each. However, according to 24/7 Wall Street Citigroup's actual book value per share was more than $68 per share in the second quarter. This is another metric that shows that Citigroup shares are trading at an incredible discount.
Analysts Also Seem To Love Citigroup
Aside from low valuations, there's another reason that Citigroup is well worth watching at the moment. After the company released a strong earnings report, analysts have been increasing the stock's target price. So far, both UBS and BMO Capital Markets have updated their coverage on the bank's stock; both increasing the target price and suggesting incredible upside potential. Overall, it seems as though analysts have an overwhelmingly bullish opinion of Citigroup.
What We Can Expect To See From Citigroup Moving Forward
Moving forward, I'm expecting to see very positive movement from Citigroup. After all, the company's stock is trading at an incredible discount; giving investors a good reason to pick up the stock. Not to mention, positive earnings have investors and analysts excited; and they should be. All in all, the company is poised for growth with incredible upside potential and little downside risk.
How Binary Options Traders Can Profit From The Trends
Because we can expect to see more growth out of Citigroup moving forward, binary options traders will want to focus on call options. With that said, it's a good idea to watch for support in the market. When Citigroup hits a point of support, ride the uptrend up with call options; making profits every step of the way.
What Do You Think?
Where do you think Citigroup is headed and why? Let us know in the comments below!