Capital One

Methodology

Capital One's credit card-focused business model creates earnings volatility tied to credit cycles, making normalized earnings essential for fair value calculations. Loss provisions can swing dramatically during economic downturns, distorting current-year EPS. The method works best when using mid-cycle normalized earnings rather than peak or trough results.

Methodology

Capital One typically trades at PEG ratios between 0.5-1.2x depending on credit cycle positioning and growth expectations. The bank's digital-first strategy and product diversification support modest earnings growth even in mature markets. PEG can mislead when provisions spike during recessions, temporarily inflating earnings growth as reserves normalize.

Methodology

PEGY adds meaningful value for Capital One given its consistent dividend and active share repurchase program that together deliver 4-6% shareholder yield. The total return framework better captures management's capital allocation discipline. During credit stress, dividends provide return stability when earnings metrics become volatile.