NEW YORK (TheStreet) -- Bank stocks are no longer "fundamentally undervalued" and will need to deliver on earnings in order to outperform in 2012, according to KBW analysts.
Financial stocks have rallied in the first few weeks of 2012, prompting questions about whether this year could be the "year of outperformance" for the sector. Financials have not outperformed the S&P 500 in five years.
Still, in a research note Sunday, the analysts note that financial stocks overall do not look particularly cheap on a 2012 forward earnings basis when compared to the S&P 500, although they still trade relatively cheaper on a price-to-book basis.
"Reviewing the historical trends in relative market cap, employment and valuation, there is no reason to believe, in our opinion, that financials are fundamentally undervalued and can continue to outperform the S&P without expanded earnings capacity," analysts led by Fred Cannon wrote in a note.
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