Capital One has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 12.4% to $221.09 per share while the index has gained 8.1%.
Is there a buying opportunity in Capital One, or does it present a risk to your portfolio? Get the full breakdown from our expert analysts, it’s free.
Why Is Capital One Not Exciting?
We're cautious about Capital One. Here is one reason you should be careful with COF and a stock we'd rather own.
Substandard TBVPS Growth Indicates Limited Asset Expansion
Tangible book value per share (TBVPS) is a crucial metric that measures the actual value of shareholders’ equity, stripping out goodwill and other intangible assets that may not be recoverable in a worst-case scenario.
Capital One’s TBVPS increased by a meager 3.2% annually over the last five years, and its recent performance paints an even worse picture as growth has decelerated a bit to a weak 1.3% over the past two years (from $89.92 to $92.35 per share).
Final Judgment
Capital One isn’t a terrible business, but it doesn’t pass our quality test. That said, the stock currently trades at 12.6× forward P/E (or $221.09 per share). This valuation is reasonable, but the company’s shakier fundamentals present too much downside risk. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at one of Charlie Munger’s all-time favorite businesses.
Stocks We Would Buy Instead of Capital One
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