Lloyds Bank(LLOY:L) Credit Suisse Upgrades on valuation

STA Research
by: STA Research

Credit Suisse’s analyst Jon Peace upgraded Lloyds Banks to Outperform from Neutral, and maintained his 40GBX target.  Peace upgraded the stock on the basis that the de-rating from the reduction in interest rates is coming to an end and the valuation of 0.6 times TBV is providing significant upside to possibly double ROTE.

STA Research(stocktargetprices) has a average target of $48.60GBX and a consensus Buy rating. STA’s view of the stock is Slightly Bearish with a score of 3.3 out of 10, where 0 is very bearish and 10 very bullish.

 
What to like:
High market capitalization
This is one of the largest entities in its sector and is among the top quartile. Such companies tend to be more stable.
Low volatility
The stock’s annual returns have been stable and consistent compared to its sector peers(for a hold period of at least 12 months) and is in the top quartile. Although
stability is good, also keep in mind it can limit returns.
Positive cash flow
The company had positive total cash flow in the most recent four quarters.
Superior Revenue Growth
This stock has shown top quartile revenue growth in the previous 5 years compared to its sector.

 
What to not like:
Poor risk adjusted returns
This company is delivering below median risk adjusted returns in its peers. Even if it is outperforming on returns , the returns are unpredictable. Proceed with caution.
Below median dividend returns
The company’s average income yield over the past 5 years has been low compared to its peers. However, it is not a problem if you are not looking for income.
Overpriced compared to earnings
The stock is trading high compared to its peers on a price to earning basis and is above the sector median.
Overpriced compared to book value
The stock is trading high compared to its peers median on a price to book value basis.
Overpriced on cashflow basis
The stock is trading high compared to its peers on a price to cash flow basis. It is priced above the median for its sectors. Proceed with caution if you are considering to buy.
Poor capital utilization
The company management has delivered below median return on invested capital in the most recent 4 quarters compared to its peers.
Poor return on assets
The company management has delivered below median return on assets in the most recent 4 quarters compared to its peers.
Highly leveraged
The company is in the bottom half compared to its sector peers on debt to equity and is highly leveraged. However, do check the news and look at its sector and
management statements. Sometimes this is high because the company is trying to grow aggressively.

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