Citigroup Stock Has Lost 16% in the Market Sell-Off. Is It a Buy?

The S&P 500 index (SNPINDEX: ^GSPC) quickly fell into correction territory not too long ago. Dropping alongside the index were the shares of Citigroup (NYSE: C). The big difference between the two sell-offs, however, was that Citigroup fell about twice as much as the S&P 500 index. Does Citigroup's sell-off make it a buy today?

Citigroup's decline is still pretty painful

The S&P 500 index's sell-off resulted in a decline of more than 10% from its high, which is known as a correction. That swift drop, however, was reversed even more quickly, with the index bouncing back more than 10% in just a single day. There's no way to know if that's just a temporary reprieve, or if the index will start climbing toward new all-time highs. That said, the drop in Citigroup's shares was much worse than that of the index.

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At its most recent low, Citigroup stock had fallen roughly 20% from its highs. Like the S&P 500 index, it has regained some of that lost ground. However, even after the upturn, Citigroup is still down about 16%, compared to the market's roughly 7.5%. That's a significant difference, with the bank stock still off by twice as much.

It isn't actually uncommon to see this type of situation among hot stocks. And Citigroup's shares had been very hot, gaining more than 40% between mid-September 2024 and its sell-off. In fact, even after the sell-off, Citigroup's shares are still up more than 20% since mid-September 2024. When markets turn lower, the hottest stocks are often the first ones that nervous investors choose to sell as they try to lock in their gains.

C data by YCharts.

Is Citigroup worth buying after the sell-off?

Here's the thing: Just because a stock has traded lower, even if that sell-off was material, it doesn't necessarily indicate that the stock is cheap. To figure out if a stock represents a compelling value, you need to look at valuation tools like price-to-sales (P/S), price-to-earnings (P/E), and price-to-book value (P/B). The numbers here aren't attractive.

Citigroup's P/S ratio is about 1.7 today, versus a five-year average of a little less than 1.5. The bank's P/E ratio is 12, versus a longer-term average of roughly 8.2. And the P/B ratio is 0.7, compared to a five-year average of about 0.6. Clearly, Citigroup's price has fallen, but it hasn't fallen to the point where the stock could be called cheap.

There's another small wrinkle here that investors should consider. If you look at the past decade, Citigroup's recent decline is pretty minor compared to other sell-offs that have occurred during that period. Although past performance is no guarantee of future returns, this history suggests that the current drop isn't really a big deal -- or at least it isn't a big deal yet. There is a very real chance, given Citigroup's valuation metrics, that it could fall even further.

Don't rush to buy Citigroup

At the end of the day, it doesn't look like Citigroup has suddenly become a screaming buy for investors with a value bias. Yes, it is cheaper than it was. But it most certainly hasn't fallen enough to suggest that anyone should run out and buy the stock like there's no tomorrow.

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Citigroup is an advertising partner of Motley Fool Money. Reuben Gregg Brewer has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.