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Bank Of Montreal Is For The Long-Term Investor

Summary

- Near term uncertainty in operations and outstanding loans should scare away short-term investors.

- Lackluster performance of the personal lending segment within Canada casts doubt on the heavy reliance on the domestic retail operations as an indicator of near term growth.

- Strong balance sheet provides a certain degree of protection from the continued depression in oil and energy prices.

- The stock's recovery will likely be a sluggish process, making it more suitable for patient, long-term investors.

By Shauvik Haldar

Things have not been too good for Bank of Montreal (NYSE:BMO) in 2015 given its plummeting stock price that has taken a larger hit compared to other Canadian banks. While BMO lost almost one-third of its market value, stocks of the Toronto-Dominion Bank (NYSE:TD), BMO's larger Canadian counterpart, and the Bank of Nova Scotia (NYSE:BNS) lost around 20% and 27% of their worth during the same period, respectively.
Bank of Montreal and other Canadian banks have struggled as of late.The 12 month trailing P/E ratios of 11.16, 12.42, and 10.96 for BMO, TD, and BNS indicate that BMO's valuation is slightly lower than that of TD, which has shown better prospects of growth because of its exposure to strategic locations in the US. Even in terms of 12 month forward P/E, BMO is expected to lag behind TD. Latest data from Capital IQ suggests that the 12 month forward P/E of BMO, TD, and BNS are 7.44, 8.14, and 7.33 respectively. BMO's historical lag in performance compared to large-cap Canadian banks is a key factor behind the bank's current valuation levels... READ MORE

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