Deutsche Bank (
Zacks Rank #1 (Strong Buy), is a global universal
bank. The banking sector has faced the headwinds of
regulation, credit retrenchment, and slow global economic growth
in recent years, but the environment looks to be improving.
Positive change may be in the air. Profit estimates are working
higher in the face of inexpensive valuatioin and a friendly
technical set up.
Upward trend in earnings estimates:
Analysts have lifted their outlook for 2013 and 2014 earnings
sharply over the past thirty days. The Zacks Earnings per
Share Consensus has increased $0.20 to $5.99 for 2013 and $0.31
to $6.91 for 2014.
The graphic displays a changing trend in earnings estimate
revisions. Estimates had been declining from the financial
crisis period, but now show signs of stabilizing. The stock
price has followed the trend in revisions, and the shift upward
is coming at a time when the company has had years to adjust to
the credit landscape, and European economic growth displays signs
The upward revision to earnings estimates has come despite the
company warning of lower debt sales and trading revenue for the
quarter in a September 25 press release. DB noted that
equity sales and trading had performed well and other businesses
were operating in line with expectations. Given the
earnings estimate revisions, it looks like any weakness in debt
sales and trading is being offset by other areas of
Valuation is compelling:
Measures of valuation suggest that DB is attractively valued.
DB is trading at a PEG ratio of 0.62 compared to a long term
median of 0.95. The market is not paying much for growth
and appears to be pricing a long term weak growth outlook.
DB is priced at 7.2 times expected 12 month forward
earnings. This compares to a longer term median of 9.3.
Investors are cautious about growth, so the surprise could
come on the upside.
DB is trading at 0.9 times tangible book value compared to a
median value of 1.3. It is well above its pre Great
Recession high of 2.3. The market is placing a discounted
view on its assets.
Relative to some of its competitors DB looks
inexpensive. For example, JP Morgan (
) is priced at 1.4 times tangible book, 8.7 times 12 month
forward earnings, and has a PEG ratio of 1.35. Looking to Europe,
Credit Suisse (
) is priced at 1.2 times tangible book, 9.1 times 12 month
forward earnings, and has a PEG ratio of 0.91.
Progression on capital building is on target:
At the end of the second quarter, Deutsche Bank's Basel 3 core
Tier 1 ratio came in at 10% comfortably ahead of the company's
forecast of 8.5% and above the first half 2012 level of less than
Technicals are constructive:
The stock has been basing in recent months and is ripe to
breakout of the base to the upside on a rally over the $52.50
area. DB is also near rallying above the downward sloping trend
line from the 2009 high hinting at potential trend change
Deutsche Bank offers the combination of upward earnings
estimate revisions, inexpensive valuation and a favorable
technical set up. Think about how it could improve the financial
condition of your portfolio.
DEUTSCHE BK AG (DB): Free Stock Analysis
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