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Capital One Shares Rally 8.3% after Earnings Beat Estimates

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Share price performance

Capital One Financial (COF) delivered better-than-expected third quarter earnings on October 22 after markets closed. Investors cheered the earnings as the company’s shares surged immediately after the release. On Friday, October 23, Capital One shares closed at $81.12, rallying 8.2% and outperforming the SPDR S&P 500 ETF (SPY).

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Analysts are bullish following the earnings release

Analysts have turned bullish on Capital One after third quarter earnings turned out better than expected. They have assigned a one-year price target of $92.20 for the stock, and as of Friday’s close at $81.12, it is trading 11.8% below its price target. Among the 32 analysts following the stock, 21 have assigned “buy” ratings. Capital One shares have received no sell ratings and have been assigned 11 “hold” ratings.

However,we should note that in the past four weeks, the estimated EPS (earnings per share) has been revised downwards eight times by research brokerages, and revised upwards nine times.

Valuations

The company’s shares trade at a price-to-book value ratio of 0.98x while the average price-to-book value ratio for banks in the XLF ETF is 1.17x. The bank is trading cheaply compared with the banking sector.

Peers such as Bank of America (BAC), Regions Financial Corporation (RF), and American Express (AXP) are trading at price-to-book value ratios of 0.74x, 0.76x, and 3.50x, respectively.

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