Bear Of The Day: Credit Suisse Group

Amid unpredictable trading and market-wide volatility, investors should do their best to avoid stocks with questionable outlooks and stretched valuations. One such example is Credit Suisse (CS – Free Report), which currently sports a Zacks Rank #5 (Strong Sell) and a “D” grade for Value in our Style Scores system.

Credit Suisse offers investment products, private banking, and financial advisory services, as well as insurance and pension solutions. The company is wrapping up a multi-year restructuring and might finally be able to see hope on the horizon, but its stock will likely remain anything but smooth in the coming weeks and months.

Latest Outlook and Valuation

Credit Suisse reported its latest quarterly earnings results on April 25, posting EPS of $0.31 and revenue of $5.94 billion. Earnings were flat on a year-over-year basis, while revenue was able to move about 7.8% higher.

Some investors thought this marginal improvement might be enough to get the stock going, but shares are actually down about 2.5% since the company’s report date. The stock has now lost more than 17% since reaching a new 52-week high in January.

Part of this decline is likely due to its sluggish earnings estimate revision picture. Analysts have revised EPS downward recently, with the Zacks Consensus Estimate for Credit Suisse’s full-year earnings dropping 13 cents in the past month alone.

Adding to the concern here is that CS still looks largely overvalued. The stock’s P/E of 13.0 might look attractive to value investors, but it is actually a noticeable premium to the average of 11.3 displayed by our “Banks – Foreign” group right now. Meanwhile, Credit Suisse is generating just $0.91 per share in cash, with cash flow growth heading in the wrong direction.

There are a number of questions lingering around the global markets, and with many investors choosing to sit things out entirely right now, there is simply no need to buy an overvalued foreign bank in the midst of a restructuring that has struggled to generate any momentum recently.