Saturday, November 22, 2008

Another Look at Citigroup, Inc.

Not a good week for Citi as the shares fell to the $4.00 range. Mike Mayo, bank analyst at Deutsche Bank, reiterated his (heavily caveatted) price target of $9.00 and that got me thinking: what would the numbers have to be for Citi to be worth $4.00?

- earnings per share of $0.70 for 2009, increasing at about 5.2% per year through 2014

- dividend per share drops to $0.14 for 2009, 20% payout rate

- book value per share of $10.81 to begin 2009, currently reported at around $17.85

That would do it. The consensus analyst EPS forecast (revised downward dramatically this week) for 2009 is $0.76 and a dividend cut seems to be in the offing. That leaves asset valuation as the key component.

No comments: