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10 Cheapest Bank Stocks to Forward Earnings (Update 3)

9. Capital One Financial

COF Chart COF data by YCharts

Shares of Capital One Financial (COF) closed at $58.52 Friday, returning 1% this year, following a 37% return during 2012. The shares trade for 1.2 times tangible book value, according to Thomson Reuters Bank Insight, and for 8.9 times the consensus 2014 EPS estimate of $6.61. The consensus 2013 EPS estimate is $6.35.

Following a dismal fourth quarter, when the company missed earnings and revenue estimates, blaming seasonal factors but also reducing its 2013 outlook based on the results, Capital One came back with first-quarter results that beat analysts' expectations.

The company reported first-quarter net income of $1.1 billion, or $1.79 a share, compared to $843 million, or $1.41 a share in the fourth quarter, and $1.4 billion, or $2.72 a share, in the first quarter of 2012.

The year-earlier period included a $594 million bargain purchase gain from the acquisition of ING Direct (USA). Excluding that gain, first-quarter 2012 earnings were $809 million, or $1.56 a share, underscoring Capital One's success in the most recent quarter.

The company's first-quarter ROA was 1.41% and its return on average tangible common equity was a solid 15.56%.

Oppenheimer analyst Oppenheimer analyst Chris Kotowski rates Capital One "outperform," with a 12- to 18-month price target of $69.00. In a note to clients late on April 18, the analyst said that "COF's 1Q13 was a tad better than we expected and way better than our worst fears."

While the first-quarter results were boosted by a release of loan loss reserves that added 23 cents a share to the bottom line, the results were "still a dime better than expected," Kotowski wrote.

Kotowski estimates Capital One will earn $6.71 a share this year, with EPS rising to $6.86 in 2014. "COF remains one of our top picks," he wrote. "Operating return on tangible common equity was 16.5%, the card business is resilient and granular with generally good earnings visibility and should fetch more that 8x current year's earnings."

Interested in more on Capital One Financial? See TheStreet Ratings' report card for this stock.

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