Capital One Financial Corp Stock Buy Recommendation Reiterated (COF)

Editor's Note: TheStreet ratings do not represent the views of TheStreet's staff or its contributors. Ratings are established by computer based on metrics for performance (which includes growth, stock performance, efficiency and valuation) and risk (volatility and solvency). Companies with poor cash flow or high debt levels tend to earn lower ratings in our model.

NEW YORK ( TheStreet) -- Capital One Financial (NYSE: COF) has been reiterated by TheStreet Ratings as a buy with a ratings score of A-. The company's strengths can be seen in multiple areas, such as its robust revenue growth, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had somewhat weak growth in earnings per share.

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Highlights from the ratings report include:
  • The revenue growth came in higher than the industry average of 4.1%. Since the same quarter one year prior, revenues rose by 22.9%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.91, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels.
  • In its most recent trading session, COF 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. Turning our attention to the future direction of the stock, it goes without saying that even the best stocks can fall in an overall down market. However, in any other environment, this stock still has good upside potential despite the fact that it has already risen in the past year.
  • The gross profit margin for CAPITAL ONE FINANCIAL CORP is currently lower than what is desirable, coming in at 33.40%. It has decreased from the same quarter the previous year. Regardless of the weak results of the gross profit margin, the net profit margin of 17.67% is above that of the industry average.

Capital One Financial Corporation operates as the bank holding company for the Capital One Bank (USA), National Association (COBNA); and Capital One, National Association (CONA), which provide various financial products and services in the United States. Capital One Financial has a market cap of $33.3 billion and is part of the financial sector and financial services industry. The company has a P/E ratio of 10.00, below the S&P 500 P/E ratio of 18.00. Shares are down 1.3% year to date as of the close of trading on Friday.

You can view the full Capital One Financial Ratings Report or get investment ideas from our investment research center.

--Written by a member of TheStreet Ratings Staff.

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