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Capital One Financial (COF)
NYSE:COF
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Capital One Financial
(NYSE:COF)72Outperform
Positive Factors
Credit Performance
January credit results showed continued moderation in year-over-year delinquencies and decelerating year-over-year card loan growth.
Strategic Acquisition
Capital One is well positioned to benefit from the pending Discover acquisition, which should unlock near-term synergies and provide meaningful strategic and operational upside for Capital One longer term.
Negative Factors
Regulatory Approval Risk
An impediment to the pending Discover acquisition is the biggest risk to our call, as the acquisition awaits approval from the Federal Reserve and the OCC.
Capital One Financial (COF) vs. S&P 500 (SPY)
Market Cap
$70.51B
Dividend Yield1.3%
Average Volume (3M)3.66M
Price to Earnings (P/E)16.0
Beta (1Y)1.20
Revenue Growth9.06%
EPS Growth-3.02%
CountryUS
Employees51,987
SectorFinancial
Sector Strength93
IndustryCredit Finance
Share Statistics
EPS (TTM)11.59
Shares Outstanding381,327,700
10 Day Avg. Volume4,021,806
30 Day Avg. Volume3,659,049
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)2.73
Price to Cash Flow (P/CF)7.60
P/FCF Ratio4.90
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
$213.07Price Target Upside14.58% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering16
Capital One Financial Business Overview & Revenue Model
Company DescriptionCapital One Financial Corporation is a diversified banking company which primarily focuses on consumer and commercial lending as well as deposit origination. It engages in providing personal and commercial banking, credit cards, loans, savings and time deposits, treasury management and depository services. The company primarily operates in the United States, Canada and the United Kingdom.
How the Company Makes MoneyCapital One makes money through various revenue streams, primarily driven by its credit card business, which generates revenue from interest charges on outstanding balances and fees, such as annual fees, late payment fees, and transaction fees. The company also earns interest income from its consumer and commercial banking operations, including auto loans and other lending products. Additionally, Capital One generates revenue from deposits, where it benefits from the spread between the interest it pays on deposits and the interest it earns from lending activities. The company also engages in partnerships, for instance with retail brands, for co-branded credit card programs, which further contribute to its earnings by expanding its customer base and enhancing fee income. Capital One's business model is supported by its digital banking platform, which reduces operational costs and enhances customer acquisition and retention.
Capital One Financial Financial Statement Overview
Summary
Capital One Financial demonstrates robust revenue growth and a strong equity position, with improvements in leverage ratios. While profitability margins and cash flow growth have shown some decline, the company maintains a stable financial outlook. Continued focus on operational efficiency and cash flow generation would further strengthen its financial health.Income Statement
Capital One Financial has shown strong revenue growth with a 25% increase from 2023 to 2024. The gross profit margin remains stable as total revenue equals gross profit, indicating effective cost management. However, net profit margin has declined slightly due to lower net income, and EBIT margin is low, suggesting room for improvement in operational efficiency. Overall, revenue growth is a strong positive, offset by lower profitability margins.75
Positive
Balance Sheet
The company exhibits a solid equity ratio at approximately 12.4%, indicating a sturdy financial foundation. The debt-to-equity ratio has improved significantly as total debt was reduced to zero by 2024, demonstrating robust financial management. Return on equity is healthy at around 7.8%, although slightly lower than prior years, reflecting a minor decline in net income versus equity. Overall, the balance sheet reflects strong equity position and improved leverage.80
Positive
Cash Flow
The cash flow analysis indicates a decrease in free cash flow compared to the previous year, but operating cash flow remains strong. The free cash flow to net income ratio is high, suggesting effective cash generation relative to earnings. However, the decrease in free cash flow growth rate from 2023 to 2024 is a concern. Overall, cash flow stability is maintained, but growth momentum has slowed slightly.70
Positive
| Breakdown | ||||
| Dec 2024 | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 |
|---|---|---|---|---|
| Income Statement | Total Revenue | |||
| 39.11B | 36.79B | 34.25B | 30.43B | 28.52B | Gross Profit |
| 46.03B | 25.77B | 34.25B | 30.43B | 28.52B | EBIT |
| 11.60M | -4.00M | 13.36B | 15.80B | 3.20B | EBITDA |
| 11.60M | 0.00 | -4.00M | -4.00M | -3.00M | Net Income Common Stockholders |
| 4.75B | 4.89B | 7.36B | 12.39B | 2.71B |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | |||
| 86.04B | 43.30B | 107.78B | 117.01B | 140.95B | Total Assets |
| 490.14B | 478.46B | 455.25B | 432.38B | 421.60B | Total Debt |
| 44.99B | 49.32B | 47.83B | 42.27B | 39.87B | Net Debt |
| -3.03B | 6.02B | 16.98B | 20.52B | -638.00M | Total Liabilities |
| 429.36B | 420.38B | 402.67B | 371.35B | 361.40B | Stockholders Equity |
| 60.78B | 58.09B | 52.58B | 61.03B | 60.20B |
| Cash Flow | Free Cash Flow | |||
| 18.16B | 19.61B | 12.88B | 11.61B | 15.99B | Operating Cash Flow |
| 18.16B | 20.57B | 13.81B | 12.31B | 16.70B | Investing Cash Flow |
| -26.41B | -21.92B | -29.74B | -31.50B | -14.84B | Financing Cash Flow |
| 8.17B | 13.84B | 25.13B | 474.00M | 25.16B |
Capital One Financial Technical Analysis
Neutral
185.95
Price Trends
192.61
Negative
183.41
Positive
161.72
Positive
Market Momentum
-1.10
Positive
38.39
Neutral
19.94
Positive
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For COF, the sentiment is Neutral. The current price of 185.95 is below the 20-day moving average (MA) of 198.82, below the 50-day MA of 192.61, and above the 200-day MA of 161.72, indicating a neutral trend. The MACD of -1.10 indicates Positive momentum. The RSI at 38.39 is Neutral, neither overbought nor oversold. The STOCH value of 19.94 is Positive, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Neutral sentiment for COF.
Capital One Financial Risk Analysis
Capital One Financial disclosed 29 risk factors in its most recent earnings report. Capital One Financial reported the most risks in the “Finance & Corporate” category.
Finance & Corporate - Financial and accounting risks. Risks related to the execution of corporate activity and strategy
Latest Risks Added 0 New Risks
Capital One Financial Peers Comparison
Overall Rating
UnderperformOutperform
Sector (64)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
75 Outperform | $21.81B | 6.56 | 21.10% | 1.78% | 19.73% | 65.57% | |
74 Outperform | $44.99B | 10.10 | 25.30% | 1.57% | 15.25% | 45.76% | |
73 Outperform | $136.34B | 12.17 | 6.04% | 3.05% | 8.20% | 49.26% | |
72 Outperform | $70.51B | 15.96 | 7.81% | 1.30% | 9.06% | -3.02% | |
72 Outperform | $324.49B | 13.28 | 9.24% | 2.34% | 13.06% | 4.94% | |
71 Outperform | $199.15B | 20.22 | 33.47% | 0.99% | 10.12% | 24.93% | |
64 Neutral | $14.34B | 10.61 | 9.28% | 4.07% | 18.04% | -9.54% |
* Financial Sector Average
Performance Comparison
COF
Capital One Financial
185.95
52.22
39.05%
AXP
American Express
284.18
68.13
31.53%
BAC
Bank of America
42.29
7.51
21.59%
C
Citigroup
72.96
17.58
31.74%
DFS
Discover Financial Services
180.94
63.72
54.36%
SYF
Synchrony Financial
55.84
15.37
37.98%
Capital One Financial Earnings Call Summary
Earnings Call Date: Jan 21, 2025 | % Change Since: -3.47% | Next Earnings Date: Apr 24, 2025
Earnings Call Sentiment Neutral
The earnings call presents a mixed sentiment with strong full-year earnings and growth in auto originations, but challenges remain with decreased pre-provision earnings, increased charge-off rates, and higher credit loss provisions. The progress in the Discover acquisition is a positive strategic move, yet operational challenges persist.Highlights
Strong Full-Year Earnings
Capital One earned $4.8 billion or $11.59 per share for the full year 2024. Adjusted earnings per share were $13.96.
Record Auto Originations
Auto originations were up 53% from the prior year quarter, marking four consecutive quarters of growth in 2024.
Improved Credit Performance
The 30-plus delinquency rate in the Domestic Card business showed year-over-year improvement, ending at 4.53%.
Capital Position and Stability
Common equity Tier 1 capital ratio ended the quarter at 13.5%, showcasing financial stability.
Positive Developments in Discover Acquisition
The acquisition of Discover is progressing with shareholder votes scheduled for February 18.
Lowlights
Decrease in Pre-Provision Earnings
Pre-provision earnings of $4.1 billion in Q4 were down 13% from the third quarter due to higher noninterest expenses.
Higher Charge-Off Rates
The charge-off rate for the Domestic Card business was 6.06%, with a 45 basis point increase from the sequential quarter.
Provision for Credit Losses Increased
Provision for credit losses was $2.6 billion in Q4, up $160 million from the prior quarter.
Decreased Liquidity Reserves
Total liquidity reserves decreased by $8 billion to $124 billion in the quarter.
Company Guidance
During the Capital One Q4 2024 earnings call, Andrew Young provided detailed guidance on various metrics, highlighting that Capital One earned $1.1 billion in the fourth quarter, translating to $2.67 per diluted common share, and $4.8 billion for the full year, equating to $11.59 per share. The fourth quarter's adjusted earnings per share, accounting for Discover integration costs and legal reserves, were $3.09, with a full-year adjusted EPS of $13.96. Pre-provision earnings in Q4 were $4.1 billion, a 13% decrease from the previous quarter, primarily due to increased noninterest expenses. Revenue grew by 2% linked-quarter, driven by higher noninterest income, while the provision for credit losses rose to $2.6 billion. The quarterly net interest margin stood at 7.03%, down 8 basis points from the prior quarter. The common equity Tier 1 capital ratio was 13.5%, slightly lower than the previous quarter. Total liquidity reserves decreased by $8 billion, ending at $124 billion, with a cash position of approximately $43 billion.Capital One Financial Corporate Events
Other
Capital One Financial to Attend UBS Conference 2025
Neutral
Feb 10, 2025
Capital One Financial Corporation announced its participation in the 2025 UBS Financial Services Conference in Miami, Florida, scheduled for February 11, 2025. The presentation will be accessible via a live audio webcast on the company’s website, with a replay available until February 24, 2025, highlighting the company’s engagement with investors and stakeholders.
Executive/Board Changes
Capital One Approves 2025 Executive Compensation Plans
Neutral
Feb 7, 2025
On February 4, 2025, Capital One’s Board of Directors approved the 2025 compensation plans for CEO Richard D. Fairbank and other executives, aligning their incentives with company performance. The 2025 plan includes performance-based awards and deferred incentives, emphasizing long-term shareholder value, and continues the practice of no cash salary for Mr. Fairbank.
M&A TransactionsBusiness Operations and StrategyFinancial Disclosures
Capital One Merges with Discover to Expand Operations
Positive
Jan 24, 2025
On February 19, 2024, Capital One Financial Corporation announced a merger agreement with Discover Financial Services, including several steps to integrate Discover into Capital One’s operations. This merger, involving multiple entities and subsidiaries, aims to strengthen Capital One’s market position and expand its banking capabilities. Discover’s financial statements for 2023 and 2024 were restated and disclosed in amended reports, highlighting the financial adjustments arising from this merger process.
Financial Disclosures
Capital One Reports December 2024 Credit Metrics
Negative
Jan 21, 2025
Capital One Financial Corporation reported its monthly charge-off and delinquency metrics for December 2024. The report highlighted an increase in the net charge-off rate for domestic credit cards, influenced by the termination of its Walmart program agreement. The auto loans segment showed stable charge-off rates with slight fluctuations in delinquency metrics, reflective of broader trends within the consumer finance sector.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.