Is Citigroup a Worthwhile Investment?

With shares of Citigroup (NYSE:C) trading around $51, is C an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

Citigroup is a global diversified financial services holding company providing consumers, corporations, governments and institutions with a broad range of financial products and services. It operates in two segments: Citicorp and Citi Holdings. The company’s products and services include: consumer banking and credit, corporate and investment banking, securities brokerage, wealth management, and transaction services to consumers, corporations, governments, and institutions worldwide.

Citigroup operates in a financial industry that is the backbone of just about every economy. The products and services offered by the company are essential to day-to-day business in just about every industry, and for every consumer. So long as the company can operate efficiently, financial service companies like Citigroup are here to stay.

T = Technicals on the Stock Chart are Strong

Citigroup stock has taken a lot of heat since the 2008 Financial Crisis. The stock looks to have formed a solid base extending back several years, so it may be poised to head higher. Analyzing the price trend and its strength can be done using key simple moving averages.

What are the key moving averages? They are the 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, Citigroup is trading above its rising key averages, which signal neutral to bullish price action in the near-term.

C

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of Citigroup options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

Citigroup Options

24.55%

0%

0%

What does this mean? This means that investors or traders are buying a very minimal amount of call and put options contracts, compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

August Options

Flat

Average

September Options

Flat

Average

As of today, there is average demand from call buyers or sellers, and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a very minimal amount of call and put option contracts, and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and what that means for Citigroup’s stock.

E = Earnings Are Increasing Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. The last four quarterly earnings announcement reactions can also help gauge investor sentiment on Citigroup’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for Citigroup look like, and more importantly, how did the markets like these numbers?

2013 Q2

2013 Q1

2012 Q4

2012 Q3

Earnings Growth (Y-O-Y)

25.00%

29.47%

24.51%

-87.80%

Revenue Growth (Y-O-Y)

-15.33%

5.59%

5.82%

-33.03%

Earnings Reaction

2.01%*

0.20%

-2.91%

5.49%

Citigroup has seen rising earnings and mixed revenue figures over the last four quarters. From these numbers, the markets have been pleased with Citigroup’s recent earnings announcements.

* as of this writing

P = Excellent Relative Performance Versus Peers and Sector

How has Citigroup stock done relative to its peers, JPMorgan Chase (NYSE:JPM), Bank of America (NYSE:BAC), Wells Fargo (NYSE:WFC), and the overall sector?

Citigroup

JPMorgan Chase

Bank of America

Wells Fargo

Sector

Year-to-Date Return

31.12%

24.41%

19.72%

26.68%

24.68%

Citigroup has been a relative performance leader, year-to-date.

Conclusion

Citigroup is a bellwether that offers essential financial products and services to consumers and companies worldwide. The stock has formed a solid base over the last few years, and looks poised to see higher prices. Over the last four quarters, investors in the company have been pleased, as earnings have been rising and revenue figures have been mixed. Relative to its peers and sector, Citigroup has been a year-to-date performance leader. Look for Citigroup to continue to OUTPERFORM.

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