U.S. Bancorp

Methodology

This EPS-based method has significant limitations for U.S. Bancorp as a bank, since traditional valuation approaches focus on price-to-tangible-book-value relative to return on equity rather than P/E multiples. Credit quality, interest rate sensitivity, and capital levels drive bank valuations more than simple earnings growth, making Peter Lynch's framework less applicable. Investors should prioritize price-to-tangible-book versus ROE analysis for regional banks like USB with consistent profitability.

Methodology

PEG ratios are problematic for U.S. Bancorp because bank earnings are highly sensitive to interest rate cycles, credit losses, and reserve builds that create volatile growth patterns unrelated to franchise quality. A low PEG during an earnings surge may precede credit normalization, while a high PEG during provisioning cycles may represent opportunity if credit quality remains strong. Price-to-tangible-book value compared to through-cycle ROE provides more reliable valuation signals than PEG for consistently profitable regional banks.

Methodology

U.S. Bancorp pays a substantial dividend reflecting its history of strong credit quality and consistent profitability, making PEGY more relevant than PEG alone by incorporating the meaningful income component. However, the fundamental limitations of using PEG for banks remain—earnings volatility from credit and rate cycles makes growth analysis unreliable. For income-focused bank investors, PEGY captures both the attractive yield and the bank's defensive characteristics, though price-to-tangible-book versus ROE remains the primary valuation framework.