Let’s talk about the popular Fifth Third Bancorp (NASDAQ:FITB). The company’s shares saw a decent share price growth in the teens level on the NASDAQGS over the last few months. As a large-cap stock with high coverage by analysts, you could assume any recent changes in the company’s outlook is already priced into the stock. However, could the stock still be trading at a relatively cheap price? Today I will analyse the most recent data on Fifth Third Bancorp’s outlook and valuation to see if the opportunity still exists.
What is Fifth Third Bancorp worth?Great news for investors – Fifth Third Bancorp is still trading at a fairly cheap price. My valuation model shows that the intrinsic value for the stock is $38.89, which is above what the market is valuing the company at the moment. This indicates a potential opportunity to buy low. However, given that Fifth Third Bancorp’s share is fairly volatile (i.e. its price movements are magnified relative to the rest of the market) this could mean the price can sink lower, giving us another chance to buy in the future. This is based on its high beta, which is a good indicator for share price volatility.
Can we expect growth from Fifth Third Bancorp?Investors looking for growth in their portfolio may want to consider the prospects of a company before buying its shares. Although value investors would argue that it’s the intrinsic value relative to the price that matter the most, a more compelling investment thesis would be high growth potential at a cheap price. However, with a negative profit growth of -1.6% expected over the next couple of years, near-term growth certainly doesn’t appear to be a driver for a buy decision for Fifth Third Bancorp. This certainty tips the risk-return scale towards higher risk.
What this means for you:
Are you a shareholder? Although FITB is currently undervalued, the adverse prospect of negative growth brings about some degree of risk. I recommend you think about whether you want to increase your portfolio exposure to FITB, or whether diversifying into another stock may be a better move for your total risk and return.
Are you a potential investor? If you’ve been keeping an eye on FITB for a while, but hesitant on making the leap, I recommend you research further into the stock. Given its current undervaluation, now is a great time to make a decision. But keep in mind the risks that come with negative growth prospects in the future.
Price is just the tip of the iceberg. Dig deeper into what truly matters – the fundamentals – before you make a decision on Fifth Third Bancorp. You can find everything you need to know about Fifth Third Bancorp in the latest infographic research report. If you are no longer interested in Fifth Third Bancorp, you can use our free platform to see my list of over 50 other stocks with a high growth potential.
We aim to bring you long-term focused research analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material.
If you spot an error that warrants correction, please contact the editor at firstname.lastname@example.org. This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. Simply Wall St has no position in the stocks mentioned. Thank you for reading.