What is CIT's Intrinsic value?

CIT Group Inc (CIT) Intrinsic Value Analysis

Executive Summary

As of May 27, 2025, CIT Group Inc's estimated intrinsic value ranges from $62.11 to $62.11 per share, depending on the valuation methodology applied.

Valuation Method Fair Value (USD) Implied Upside/Downside
Dividend Discount Model (Stable) $62.11 +16.1%

Is CIT Group Inc (CIT) undervalued or overvalued?

With the current market price at $53.50, the stock appears to be moderately undervalued.

Understanding Intrinsic Value

Intrinsic value represents the "true" worth of a company based on its fundamentals rather than market sentiment. We've employed multiple methodologies to triangulate CIT Group Inc's intrinsic value, including:

  1. Dividend Discount Model (DDM): Values the company based on expected future dividend payments

Weighted Average Cost of Capital (WACC)

The cost of capital is a critical factor in valuation models, representing the required return for investors.

WACC Component Low High
Long-term bond rate 3.2% 3.7%
Equity market risk premium 4.2% 5.2%
Adjusted beta 1.48 1.61
Cost of equity 9.4% 12.6%
Cost of debt 5.0% 5.0%
Tax rate 22.7% 28.3%
Debt/Equity ratio 0.9 0.9
After-tax WACC 6.8% 8.3%

Valuation Methods

2. Dividend Discount Model (DDM)

The DDM values a company based on its expected future dividend payments. We used two approaches:

Multi-Stage DDM:

  • Current payout ratio: 23.9%
  • Stable payout ratio: 90.0%
  • Growth transition: 5 years
  • Cost of equity: 11.0%
  • Long-term growth rate: 1.0%
  • Fair value: $-45.47 (-185.0% from current price)

Stable DDM:

  • Stable payout ratio: 70% (Low) to 90% (High)
  • Cost of equity: 12.6% (Low) to 9.4% (High)
  • Long-term growth rate: 0.5% (Low) to 1.5% (High)
  • Fair value range: $42 to $82
  • Selected fair value: $62.11 (16.1% from current price)

Key Financial Metrics

Metric Value
Market Capitalization $5276M
Enterprise Value $9523M
Trailing P/E 7.38
Forward P/E 7.38
Trailing EV/EBITDA 0.00
Current Dividend Yield 323.94%
Dividend Growth Rate (5Y) 8.67%
Debt-to-Equity Ratio 0.90

Investment Decision Framework

To determine the most reliable intrinsic value estimate, we weigh each valuation method based on:

  1. Forecast Certainty: DCF methods rely on long-term projections, while earnings power value focuses on current normalized earnings
  2. Business Model Alignment: Dividend models are more appropriate for mature companies with established dividend policies
  3. Historical Accuracy: How well each method has predicted fair value historically

Valuation Weight Matrix

Valuation Method Weight Weighted Value
Dividend Discount Model (Stable) 100% $9.32
Weighted Average 100% $62.11

Investment Conclusion

Based on our comprehensive valuation analysis, CIT Group Inc's weighted average intrinsic value is $62.11, which is approximately 16.1% above the current market price of $53.50.

Key investment considerations:

  • Historical dividend growth of 8.67%

Given these factors, we believe CIT Group Inc is currently moderately undervalued with the potential for long-term appreciation based on the company's growth trajectory and financial strength.