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TheStreet Open House

Why Citigroup (C) Stock Is Lower Today

NEW YORK (TheStreet) -- Shares of Citigroup Inc.  (C)  are slightly lower in pre-market trade after it was reported that the bank has been sending hedge fund firms letters informing them that it cannot sell investments in hedge funds and private equity funds to clients after a deal with SEC, according to the  the Wall Street Journal.

This month the bank reached a $285 million fraud settlement with the SEC over a complaint involving a 2007 sale of mortgage-linked securities debt that resulted in over $700 million of investor losses.

Citigroup said in the letter to hedge fund firms that it was working with the SEC to resolve the issue, but that the bank is allowed to sell private investments to large institutions, the Journal said.

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TheStreet Ratings team rates CITIGROUP INC as a Buy with a ratings score of B. TheStreet Ratings Team has this to say about their recommendation:

"We rate CITIGROUP INC (C) a BUY. This is driven by a number of strengths, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. Among the primary strengths of the company is its expanding profit margins over time. We feel these strengths outweigh the fact that the company has had lackluster performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 40.66% is the gross profit margin for CITIGROUP INC which we consider to be strong. It has increased from the same quarter the previous year. Despite the strong results of the gross profit margin, C's net profit margin of 0.78% significantly trails the industry average.
  • Regardless of the drop in revenue, the company managed to outperform against the industry average of 11.9%. Since the same quarter one year prior, revenues slightly dropped by 6.8%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • CITIGROUP INC has experienced a steep decline in earnings per share in the most recent quarter in comparison to its performance from the same quarter a year ago. This company has reported somewhat volatile earnings recently. We feel it is likely to report a decline in earnings in the coming year. During the past fiscal year, CITIGROUP INC increased its bottom line by earning $4.25 versus $2.46 in the prior year. For the next year, the market is expecting a contraction of 16.5% in earnings ($3.55 versus $4.25).
  • Net operating cash flow has significantly decreased to $2,012.00 million or 89.95% when compared to the same quarter last year. Despite a decrease in cash flow CITIGROUP INC is still fairing well by exceeding its industry average cash flow growth rate of -103.82%.
  • In its most recent trading session, C has closed at a price level that was not very different from its closing price of one year earlier. This is probably due to its weak earnings growth as well as other mixed factors. Despite the decline in its share price over the last year, this stock is still more expensive (when compared to its current earnings) than most other companies in its industry. We feel, however, that other strengths this company displays compensate for this.
  • You can view the full analysis from the report here: C Ratings Report
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