1 Date: October 22,2012 Analyst Name: Jun Mei CIF Stock Recommendation Report (Fall 2012) Company Name and Ticker: KeyBank (KEY) Section (A) Summary Recommendation Buy: Yes No Target Price: Stop-Loss Price: Sector: Financial Industry: Banking Market Cap (in Billions): 8.18 # of Shrs. O/S (in Millions): 943.44 Current Price: $8.74 52 WK Hi: $9.12 52 WK Low: $6.60 EBO Valuation: $9.40 Morningstar (MS) Fair Value Est.: $10 MS FV Uncertainty: High MS Consider Buying: $6.00 MS Consider Selling: $15.50 EPS (TTM): .79 EPS (FY1): .88 EPS (FY2): .88 MS Star Rating: 3 Stars Next Fiscal Yr. End ”Year”: 2012 “Month”: December Last Fiscal Qtr. End: October 18,2012 Less Than 8 WK: Y N If Less Than 8 WK, next Earnings Ann. Date: December 2012 Analyst Consensus Recommendation: Hold Forward P/E: 9.8 Mean LT Growth: 5.23 PEG: 1.90 Beta: .91 % Inst. Ownership: 84.42 Inst. Ownership- Net Buy: Y N Short Interest Ratio: Short as % of Float: Ratio Analysis Company Industry Sector P/E (TTM) 9.87 20.75 32.78 P/S (TTM) 1.98 4.69 5.37 P/B (MRQ) .82 1.58 1.31 P/CF (TTM) 12.4 5.91 12.51 Dividend Yield 2.29 2.25 1.97 Total Debt/Equity (MRQ) 80.51 156.45 151.50 Net Profit Margin (TTM) 20.89 19.03 17.16 ROA (TTM) .98 .56 .95
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CIF Stock Recommendation Report (Fall 2012) · Provide brief summary of your analysis in each section that follows Company Profile: KeyBank, headquartered in Cleveland, Ohio, is the
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Date: October 22,2012
Analyst Name: Jun Mei
CIF Stock Recommendation Report (Fall 2012)
Company Name and Ticker: KeyBank (KEY)
Section (A) Summary
Recommendation Buy: Yes No Target Price: Stop-Loss Price:
Sector: Financial Industry: Banking Market Cap (in Billions): 8.18
# of Shrs. O/S (in Millions): 943.44
Current Price: $8.74
52 WK Hi: $9.12
52 WK Low: $6.60
EBO Valuation: $9.40
Morningstar (MS) Fair Value Est.: $10
MS FV Uncertainty: High
MS Consider Buying: $6.00
MS Consider Selling: $15.50
EPS (TTM): .79
EPS (FY1): .88
EPS (FY2): .88
MS Star Rating: 3 Stars
Next Fiscal Yr. End ”Year”: 2012 “Month”: December
Last Fiscal Qtr. End: October 18,2012 Less Than 8 WK: Y N
If Less Than 8 WK, next Earnings Ann. Date: December 2012
Analyst Consensus Recommendation: Hold
Forward P/E: 9.8
Mean LT Growth: 5.23
PEG: 1.90
Beta: .91
% Inst. Ownership: 84.42
Inst. Ownership- Net Buy: Y N
Short Interest Ratio: Short as % of Float:
Ratio Analysis Company Industry Sector
P/E (TTM) 9.87 20.75 32.78
P/S (TTM) 1.98 4.69 5.37
P/B (MRQ) .82 1.58 1.31
P/CF (TTM) 12.4 5.91 12.51
Dividend Yield 2.29 2.25 1.97
Total Debt/Equity (MRQ) 80.51 156.45 151.50
Net Profit Margin (TTM) 20.89 19.03 17.16
ROA (TTM) .98 .56 .95
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ROE (TTM) 8.58 6.93 5.79
Investment Thesis I recommend the Cougar Investment Fund to not by this stock for the following reasons:
Unattractive Valuation ratios (P/B, P/CF, PE,PEG) comparing to its competitors.
Current price is near its 52 weeks high and I don't there are much growth potential.
54% of the analysts recommended to hold the stock while only 12 percent recommended to buy.
Competitors stock prices increase at a faster rate than Key.
Even though Key revenue and earnings have surpassed its estimated, stock price still reflect slow growth in the past year.
MS 3 star ratings and high uncertainty FV.
Summary Provide brief summary of your analysis in each section that follows
Company Profile: KeyBank, headquartered in Cleveland, Ohio, is the 24th biggest bank in the United States with 87 billion in Assets.
Fundamental Valuation: EBO valuation is $9.40 with normal growth period to 2016.
Relative Valuation: P/B and P/S ratio: KeyBank is the second lowest at .82 for P/B and 3rd highest with 1.98 for P/S comparing to the 4 major competitors. These two ratios are somewhat unattractive for investors since competitors' ratio are better.
Revenue and Earnings Estimates: Actual revenue and earnings have surpassed its estimated.
Analyst Recommendations: Majority of the analyst recommended to hold the stock. Only 4 out of 31 recommended to buy.
Institutional Ownership: Institutional ownership is 85.37%.
Short Interest: Short interest varies throughout this year. Months from June to August saw the biggest changes.
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Stock Price Chart: From a 3 months and 1 year horizon, KEY is less volatile compared to its competitor. But, the stock is nowhere near recovery from the financial crisis.
Section (B) Company Profile (two pages maximum)
Company Summary
KeyBank originated in Cleveland Ohio around 160 years. "The Company provides a range of
retail and commercial banking, commercial leasing, investment management, consumer finance
and investment banking products and services to individual, corporate and institutional clients
through two business segments: Key Community Bank and Key Corporate Bank"(Reuters.com).
Today the company has 87 billion in assets and operate in 14 states throughout the country.
Business Model, Competition, Environment and Strategy
KeyBank compete in the financial service industry with the financial sector. Some of the its
competitors include Bank of America, JP Morgan Chase, U.S Bank, and Wells Fargo. Out of its
competitors, KeyBank has the lowest in assets with 87 billion. Tying to its assets, KeyBank's
differentiation strategy against its competitor is picking "markets within each state. We pick
cities where we do business and really look to enhance our presence in those cities. The whole
model is designed to be a local bank"(Oregonlive.com).
Beside commercial banking, Key also compete in the "corporate trust services, personal
financial services, access to mutual funds, cash management services, investment banking and
capital markets products, and international banking services. Through its bank, trust company
and investment adviser subsidiaries, the Company provides investment management services
to clients that include corporate and public retirement plans, foundations and endowments,
individuals and trust funds" (Reuters.com) .
Revenue and Earnings History
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This information is available in Reuters.com, “Financials” tab. Copy/paste the quarterly
revenue and earnings per share numbers for the most recent three years. Add the numbers
over four fiscal quarters to get annual revenue and earnings. For the current fiscal year, go
ahead add up as many quarters as are available. NOTE: revenue numbers are “in millions”.
Discuss any pattern in revenue and earnings (e.g., increasing year over year; seasonal; etc.)
Annual Income Statement
View: Income Statement
Annual Interim
In Millions of U.S. Dollars (except for per share items)
2011 2011-12-31 Period Leng
th 12 Months
2010 2010-12-31
Restated 2011-12-31 Period Leng
th 12 Months
2009 2009-12-31 Reclassified 2011-12-31 Period Leng
th 12 Months
2008 2008-12-31
Restated 2009-12-31 Period Leng
th 12 Months
2007 2007-12-31
Restated 2009-12-31 Period Leng
th 12 Months
Interest Income, Bank 2,889.0 3,408.0 3,795.0 4,353.0 5,336.0
Basic EPS Excluding Extraordinary Items
0.920 0.472 (2.268) (2.971) 2.385
The trend for revenue has been decreasing at a steady pace since 2007. At 2007,
revenue was at 5.33 billion compared to 2.89 billion in 2011. This is due to the
impact of the financial crises where the company is still recovering from it. As for
EPS, KeyBank suffered negative EPS during 2008 and 2009, since then, it has been
increasing slightly at .472 in 2010 and .920 in 2011.
Section (C) Fundamental Valuation (EBO)
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Include the following here:Copy/paste completed Fundamental Valuation (EBO) Spreadshe
Inputs (provide below input values used in your analysis)
EPS forecasts (FY1 & FY2): .88 and .88
Long-term growth rate: 5.23%
Book value /share (along with book value and number of shares outstanding):
Book value: _____________________
# of shares outstanding: _____________________
Book value / share: 10.39
Dividend payout ratio: 18.02
Next fiscal year end: 2012
Current fiscal month: October
KEY PARAMETERS FY1 FY2 Ltg
EPS Fore casts 0.88 0.88 5.23% Mode l 1: 12-ye ar fore casting horiz on (T=12).
Book value /share (last fye ) 10.39 and a 7-ye ar growth pe riod.
Discount Rate 8.88%
Divide nd Payout Ratio (POR) 18.02% Please download and save this template to your own storage device
Ne xt Fsc Ye ar e nd 2012 You only ne e d to input value s to ce lls highlighte d in "ye llow"
Curre nt Fsc Mth (1 to 12) 10 The re st o f the spre adshe e t is calculate d automatically
Targe t ROE (industry avg .) 11.85% Ple ase re ad "Guide line s_for_Fundame ntalValuation_ProfLe e _Spre adshe e t" file care fully
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