NEW YORK (TheStreet) -- Citigroup (C - Get Report) stock continues to lag its peers when it comes to rewarding investors. Shares closed Friday at $50.11, down 2% for the day and down 3.8% on the year to date. Citi continues to trail its competitors Wells Fargo (WFC - Get Report) , Bank of America (BAC - Get Report) and JPMorgan Chase (JPM - Get Report) , which have posted 2014 gains of 11.5%, 5.8% and 0.7%, respectively. Citi reports third-quarter earnings Tuesday.
But don't cry over spilled milk. Now's the time to buy.
Based on the bank's improved fundamentals, these shares look to be heading to $60 to $65 in the next 12 to 18 months. That suggests a premium to the current price of 20% to 30%. And that still lower than Citi's highest analyst price target of $67, which calls for gains of 33.7% from current levels.
Among the 24 analysts that cover the stock, Citi's average 12-month price target stands at $59.50, according to CNN Money, which would be a gain of 18.7%.
Bank of America analyst Erica Najarian calls Citi stock "a bargain" and believes the shares are heading to $65.
Oppenheimer analyst Chris Kotowski likes Citi's potential and believes investors should look more deeply to appreciate the bank's value.
Kotowski, who has a price target on the stock of $64 by the end of 2015, believes Citi could be valued at $73 to $78 per share on a sum-of-the-parts basis, writing, "This is what makes us view Citi as the last great bargain in financial services."
These are aggressive targets. But a roadmap has been laid out for investors.
First, based on forward earnings estimates of $5.37, according to Yahoo! Finance, Citi shares are trading on a multiple of 9.33. This, too, is the lowest among the big four banks.
Wells Fargo trades at a multiple of 12, while Bank of America is valued at a forward multiple of 11. JPMorgan is the only other big major trading in a single digit multiple at 9.76. In that regard, Citi stock would have to exceed, say, $70 per share before the word "expensive" could even be used.
Secondly, while the bank continues to sort out its legal issues and make amends for its part in the credit crisis, Citi is no longer shooting itself in the foot.
In the July quarter, the company generated a profit of $1.24 per share, which topped consensus estimates by 19 cents. That's a 15% beat, despite the revenue struggles (down 5% year-over-year) that plagued the entire sector due to weak interest rates. Even then, Citi is protected since it relies less on residential mortgage market compared to its peers.
Last but not least, Citi's balance sheet, which includes a net cash position of $211 billion, removes some of the risks that have scared off investors in the past. This underscores the pace of the bank's recovery, as it sheds poorly performing assets. That will help offset legal expenses and costs related to regulatory compliance.
All told, Citi is much improved today when compared to where it was six months ago and especially last year. Progress is what investors should want to see. And as the company continue to grow its earnings, there will also be progress in its dividend yield, which stands at just 0.08%.
While its dividend trails both Wells Fargo and JPMorgan, which pay yields of 2.7%, Citi offers large potential stock gains. And for now, that's where investors' focus should be.
At the time of publication, the author held no positions in any of the stocks mentioned.
This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.
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 several positive factors, which we believe should have a greater impact than any weaknesses, and should give investors a better performance opportunity than most stocks we cover. The company's strengths can be seen in multiple areas, such as its expanding profit margins and increase in stock price during the past year. We feel these strengths outweigh the fact that the company has had sub par growth in net income."
You can view the full analysis from the report here: C Ratings Report