Commonwealth Bank Story

Commonwealth Bank of Australia -- USA Stock  

USD 63.45  0.55  0.86%

Macroaxis News
By David Taylor

Commonwealth Bank of Australia provides retail banking and financial services to personal, business and institutional clients.  The company has a market capitalization of $36 billion and a share price of $63.02.  

The bank is profitable.  In fact, it has very strong earnings, however they have been declining of late.  

A bank that is well undervalued with strong earnings.

Commonwealth Bank of Australia is a retail bank that has positive earnings but is trading at about 1/4 of the price it should be trading.  The company has positive earnings as well as strong earnings.  However, investors have been staying away from bank stocks.  But, look at these earnings and the strong EPS.  Maybe it will coax you into investing.  

Commonwealth Bank of Australia provides retail banking and financial services to personal, business and institutional clients.  The company has a market capitalization of $36 billion and a share price of $63.02.  

The bank is profitable.  In fact, it has very strong earnings, however they have been declining of late.  Here is a listing of the past few years earnings-per-share for the bank:

2012:  $14.45

2013:  $14.56

2014:  $13.75

2015:  $11.83

As stated, earnings have been declining over the past many years.  However, that should not deter someone from investing in the stock.  Australia is dependent upon China for selling a great deal of their resources to.  However, China’s economy has fallen down to a year-over-year rate of growth for their GDP to 6.5%.  Granted, that is considered extremely hot for any other country to be growing at.  But, for China, that is a slowdown from its double-digit growth of so many years running.

But, the economy in the United States is expanding well.  Employment is beyond what economists consider full employment.  Incomes in the U.S. are also increasing on a year-over-year basis.  Any slowdown seen from the Great Recession is largely over and it is a matter of time before the rest of the country gets in to the swing of things and goes from marginally employed to fully employed.  

When that happens, which those seeds are already sprouting, China’s economy will begin to expand again.  Then, resources will be needed from Australia again, pushing up the financial sector more.  This process has largely begun and around the world the economies are starting to show signs of this.  Getting in on a stock like CMWAY would be an excellent opportunity to profit from the economic expansion.

But, these are just generalities.  Although CMWAY’s stock is off of its highs, it was sold off harshly.  Keep in mind this is a company that is profitable and earning an income.  EPS was $11.83 in 2015.  Yet, the stock is trading at $63.02.  This is about 5-times EPS.  That would mean, if you were to invest in the company, and the earnings were largely the same, your return would be some 20%.  That is a compelling investment return.  

There is a bit more to the numbers on this company.  Total loans show how the bank has been able to maintain some consistency in their operations, as this listing shows:

2012:  $128,725

2013:  $129,029

2014:  $136,392

2015:  $136,143

But, interest rates have been declining in AU lately, and, by coincidence, so has interest income, listed for the same period:

2012:  $36,445

2013:  $31,528

2014:  $28,779

2015:  $24,802

Despite loans remaining relatively the same, and, in fact, the bank’s loan portfolio increased over this period, the interest income did not as this second listing shows.  This is indicative of interest rates moving lower in Australia and the effects that is having.  

Still, given the overall strength of the company, the fact that you can add this stock into your portfolio and receive about a 20% return from owning the company’s stock, it is hard to pass up an opportunity like CMWAY.  The fundamentals favor this company.  The bank will likely start to swing around to positive growth by the later half of this year.  Then, if the bank’s stock were to push to the industry’s average the stock would be trading over $200.00 per share.  That is a tremendous move from its current level of $63.00 per share.  

You would not need to be holding this stock for very long to see profits.  With the world’s economy moving so will this bank’s fortunes. 

Story Momentum

This headline from Macroaxis disseminated on 02/13/2017 added to the next day closing price rise.The overall trading delta to closing price of the next trading day was 0.56% . The overall trading delta when the story was published to current closing price is 1.22% .

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Return On Asset

Return On Asset Comparative Analysis
      Commonwealth Bank Comparables 
Commonwealth Bank is currently under evaluation in return on asset category among related companies. Return on Asset or ROA shows how effective is the management of the company in generating income from utilizing all of the assets at their disposal. It is a useful ratio to evaluate the performance of different departments of a company as well as to understand management performance over time.