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U.S. Bancorp Stock in 3 Charts

While it's true that higher compliance costs and persistently low interest rates have weighed on U.S. Bancorp's profitability over the past few years, causing its return on average common equity to drop from 16.2% in 2012 down to 14% last year, the downward trend should change direction when the economy once again picks up steam.

Data source: YCharts.com.

2. Valuation

One consequence of U.S. Bancorp's industry-leading profitability is the fact that its shares trade for a higher valuation than most of its peers. A popular metric to assess bank stock valuations is the price-to-tangible book value ratio. This compares a bank's stock price to its tangible book value per share.

As a general rule, well-run banks such as U.S. Bancorp trade for a premium to their tangible book values. Less profitable banks, on the other hand, often trade for a discount to tangible book value. Given this, as you can see in the chart below, it makes sense that U.S. Bancorp's shares trade for a much higher valuation than any of its peers, outdistancing even Wells Fargo .

USB Total Return Price Chart

USB total return price data by YCharts .

As the chart above illustrates, after factoring in dividends and stock buybacks, shares of U.S. Bancorp have returned a total of 256% over the past 16 years. Its closest rival is Wells Fargo, which produced a total shareholder return of 217% over the same stretch.

The point here is that U.S. Bancorp's stock may seem expensive, but, as the old saying goes, you get what you pay for.

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The article U.S. Bancorp Stock in 3 Charts originally appeared on Fool.com.

John Maxfield owns shares of U.S. Bancorp and Wells Fargo. The Motley Fool owns shares of and recommends Wells Fargo. The Motley Fool has the following options: short May 2016 $52 puts on Wells Fargo. Try any of our Foolish newsletter services free for 30 days . We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy .

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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