Citigroup stock: A good idea for last March

— -- A: Your instincts are good, but you may be a little late.

Many financial stocks, including Citigroup, were priced for financial disaster earlier this year.

Not surprisingly, when disaster was averted, shares of financial stocks exploded to the upside. They continue to be among the best performers from the market's low in March. You can read more here about financial stocks' strong performance.

So, have these stocks, including Citigroup, run up so much that there's no room left for profit? To find out, I'll run Citigroup through Ask Matt's four tests for stocks:

Step 1: Risk vs. reward. When you take a risk on a stock, you want to make sure you're properly rewarded. Downloading Citigroup's trading history back to 1977, we see the company generated an average annual compound rate of price appreciation of 10.9%. Add in the current dividend yield of 0.9%, and that gets you to an estimated future return of 11.8%. This is better than average; the S&P 500 posted an 10.3% average annual return in the same time frame, says IFA.com.

But here's the rub. If you owned Citigroup, you accepted higher risk — standard deviation — of 38.3 percentage points. That's more than double the 15.4 percentage point risk of the S&P 500 during the period. So to get a 14.6% higher return you accepted 149% higher risk. Not a great tradeoff, since you're not getting a large enough return to justify the higher risk.

Step 2: Measure the stock's discounted cash flow. Some investors decide if a stock is pricey by comparing its current price to the present value of its expected cash flows. It's a complicated analysis made simple with a system from NewConstructs. When I run Citigroup's stock, I find it's rated "dangerous." In other words, the stock is expensive relative to the cash the company is expected to generate over its lifetime.