Could Cash Machine Capital One Financial Stock Be Your Next Buy?
Capital One Financial (COF) could be a good pick for your portfolio, with its high cash yield, good fundamentals, and discounted valuation. Companies like this can use cash to fuel additional revenue growth, or simply pay their shareholders through dividends or buybacks. Either move makes them attractive to the market
COF Has Good Fundamentals
- Good Cash Yield: Not many stocks offer free cash flow yield of 23.0%, but Capital One Financial stock does
- Strong Margin: Last 12 month operating margin of 0.0%
- Growth: Last 12 revenue growth of 36.5% – low growth, but this selection is all about high yield and margin
- Valuation: COF stock currently trading at 30% below 2Y high, 16% below 1M high, and at a PS lower than 3Y average.
Below is a quick comparison of COF fundamentals with S&P medians.
| COF | S&P Median | |
|---|---|---|
| Sector | Financials | – |
| Industry | Consumer Finance | – |
| Free Cash Flow Yield | 23.0% | 4.3% |
| Revenue Growth LTM | 36.5% | 6.6% |
| Revenue Growth 3YAVG | 16.8% | 5.5% |
| Operating Margin LTM | � | 18.7% |
| Operating Margin 3YAVG | � | 18.2% |
| PE Ratio | 46.3 | 24.2 |
*LTM: Last Twelve Months
But What Is The Risk Involved?
While COF stock may be a compelling investment opportunity, it’s always helpful to be aware of a stock’s history of drawdown. COF fell 44% in the Dot-Com crash, nearly 90% in the Global Financial Crisis, and 50% during the inflation shock. The 2018 correction pulled it down about 32%, while the Covid pandemic saw a 60% drop. The numbers show even solid companies face big hits when downturns hit hard. Strong fundamentals don’t guarantee immunity. But the risk is not limited to major market crashes. Stocks fall even when markets are good – think events like earnings, business updates, outlook changes. Read COF Dip Buyer Analyses to see how the stock has recovered from sharp dips in the past.
For more details and our view, see Buy or Sell COF Stock.
Stocks Like COF
Not ready to act on COF? Consider these alternatives:
We chose these stocks using the following criteria:
- Greater than $2 Bil in market cap
- Dipped last month & meaningfully below 2Y high
- Current P/S < last few year average
- Strong operating margin with no instances of large margin collapse
- High free cash flow yield
A portfolio of stocks with the criteria above would have performed has follows since 12/31/2016:
- Average 6-month and 12-month forward returns of 10.4% and 20.4% respectively
- Win rate (percentage of picks returning positive) of about 74% for 12-month period
- Strategy consistent across market cycles
Portfolios Beat Stock Picking
Stocks soar and sink – the key is staying invested. A balanced portfolio helps you ride market volatility, boosts gains and reduces single stock risk.
Beating the market consistently is hard, but the Trefis High Quality (HQ) Portfolio makes it look achievable. By selecting 30 high-conviction stocks, the HQ strategy has historically outpaced the S&P 500, S&P Mid-cap, and Russell 2000. See how this curated selection delivers superior risk-adjusted returns in our detailed performance factsheet.