Capitol Federal Financial (CFFN) Has A Fresh Update, But What Is Drawing Attention?

Capitol Federal Financial earnings and dividend snapshot

Capitol Federal Financial (CFFN) just released fourth quarter and full year results, reporting net interest income of US$54.83 million for the quarter and US$211.9 million for the year.

The bank also posted quarterly net income of US$22.38 million and full year profit of US$86.4 million, figures that give investors fresh context for assessing the stock following the October 28 announcement.

Capitol Federal Financial’s recent earnings and dividend news comes after a mixed price stretch, with the share price down 7.36% over the past 90 days, yet still showing a 26.01% year-to-date share price return and a 46.95% one-year total shareholder return.

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Capitol Federal Financial now offers recent profit figures, a fresh dividend and a share price that has cooled after a strong year. Does that mix still skew the risk reward in favour of new buyers?

Preferred Price-to-Earnings of 11.8x: Is it justified?

Valuation on Capitol Federal Financial today hinges on a fairly straightforward signal. The shares last closed at $8.43 and sit on a P/E of 11.8x that screens as only modestly different from both peers and the wider US market.

The P/E metric focuses on what investors are currently paying for each dollar of reported earnings. For a bank such as Capitol Federal Financial, it effectively condenses views on profitability, loan quality and capital discipline into a single figure, which is why many investors lean on it when comparing listed lenders.

At 11.8x earnings, the stock trades slightly below the broader US market multiple of 18x, yet marginally above the US Banks industry average of 11.3x. That mix suggests investors are not heavily discounting the business, but they are also not granting a premium despite CFFN’s track record of earnings growth, high quality past profits and more recent improvement in profit margins. The fair P/E estimate of 10.8x is lower than the current level. This points to a valuation that could move down if the market ever aligns more closely with that fair ratio.

Explore the SWS fair ratio for Capitol Federal Financial.

Result: Price-to-Earnings of 11.8x (OVERVALUED)

Still, the recent 7.36% three month share price decline, along with any shift in loan quality or funding costs, could quickly challenge the current Capitol Federal Financial valuation story.

Find out about the key risks to this Capitol Federal Financial narrative.

Another view on Capitol Federal Financial’s value

The P/E ratio paints one picture for Capitol Federal Financial, but the SWS DCF model sketches a tougher one. On that cash flow view, CFFN at $8.43 screens as overvalued against an estimated future cash flow value of $2.34. Which signal do you treat as the anchor?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Capitol Federal Financial for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 33 high quality undervalued stocks. If you save a screener we even alert you when new companies match – so you never miss a potential opportunity.

Next Steps

Plenty of mixed signals surround Capitol Federal Financial right now, so do not wait for consensus to form before you test the numbers yourself. To weigh the upside against the issues flagged, start by grounding your view in the 3 key rewards and 2 important warning signs.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

Companies discussed in this article include CFFN.

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