3. Capital One Financial


Shares of Capital One Financial ( COF) closed at $57.10 Friday, returning 36% year-to-date, following a flat return during 2011.

The shares trade for 1.5 times tangible book value, and for 8.1 times the consensus 2013 EPS estimate of $7.01. The consensus 2014 EPS estimate is $7.38.

2012 has been a transformative year for Capital One, with the company's acquisition of ING Direct (USA) in February, a $1.25 billion common equity raise in March, and the purchase of HSBC's ( HBC) U.S. credit card portfolio in May, for a premium of $2.5 billion. The ING deal included roughly $80 billion in deposits gathered over the Internet, along with $41 billion in loans, providing plenty of liquidity for the $28.2 billion in credit card loans acquired from HSBC.

The third quarter was the first "clean quarter" for Capital One during 2012, as the company moved past the bulk of one-time items related to the acquisitions. Third-quarter earnings available to common shareholders totaled $ $1.17 billion, or $2.01 a share, excluding income from discontinued operations.

The company's net interest margin was 6.97% in the third quarter, increasing from 6.04% the previous quarter (when the company's margin declined because of the ING acquisition, without yet realizing a full quarter's benefit from the HSBC cards), but narrowing from 7.40% a year earlier. The year-over-year narrowing of the margin is in line with the industry, in the prolonged low-rate environment.

Capital One's third-quarter return on average assets was 1.60% and its return on average tangible equity was 21.48%, compared to ROA of 1.72% and ROTCE of 22.58% a year earlier, moving the company back to its expected strong earnings level as a lender focused on card lending.

FBR analyst Paul Miller on Dec. 19 included Capital One among his list of "stocks to own for 2013," with a price target of $72, saying the company is "one of our favorite names due to its compelling valuation ($72 target = 10x our FY13 EPS estimate and 1.1x book value), expected resumption of the dividend, and increased earnings power."

FBR estimates that Capital One will earn $7.15 a share in 2013, followed by EPS of $7.25 in 2014.

COF Chart COF data by YCharts

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

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