Financial Services Stocks

SEI Investments Co Valuation – July 2018 $SEIC

Company Profile (excerpt from Reuters): SEI Investments Company, incorporated on November 18, 1968, provides investment processing, investment management and investment operations solutions. The Company provides its solutions to financial institutions, financial advisors, institutional investors, investment managers and ultra-high-net-worth families in the United States, Canada, the United Kingdom, continental Europe and various other locations around the world. The Company’s segments are Private Banks, Investment Advisors, Institutional Investors, Investment Managers and Investments in New Businesses. The Company’s investment management business solutions include investment processing outsourcing solutions for providers of institutional and private-client wealth management services, including banks, trust companies, independent wealth advisors and other financial services firms, and investment management solutions for institutional investors, including retirement plan sponsors, not-for-profit organizations and individual investors. Its investment management business solutions also include investment operations outsourcing solutions for investment management firms, banks and investment companies that sponsor and distribute mutual funds, hedge funds and alternative investments.

 

Downloadable PDF version of this valuation:

ModernGraham Valuation of SEIC – July 2018

Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?

What kind of Intelligent Investor are you?

Defensive Investor; must pass 6 out of the following 7 tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $9,587,400,370 Pass
2. Sufficiently Strong Financial Condition Current Ratio > 2 5.46 Pass
3. Earnings Stability Positive EPS for 10 years prior Pass
4. Dividend Record Dividend Payments for 10 years prior Pass
5. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 133.64% Pass
6. Moderate PEmg Ratio PEmg < 20 24.43 Fail
7. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 6.16 Fail
Enterprising Investor; must pass 4 out of the following 5 tests, or be suitable for the Defensive Investor.
1. Sufficiently Strong Financial Condition Current Ratio > 1.5 5.46 Pass
2. Sufficiently Strong Financial Condition Debt to NCA < 1.1 0.00 Pass
3. Earnings Stability Positive EPS for 5 years prior Pass
4. Dividend Record Currently Pays Dividend Pass
5. Earnings Growth EPSmg greater than 5 years ago Pass

 

Stage 2: Determination of Intrinsic Value

EPSmg $2.47
MG Growth Estimate 9.40%
MG Value $67.46
Opinion Fairly Valued
MG Grade B-
MG Value based on 3% Growth $35.83
MG Value based on 0% Growth $21.01
Market Implied Growth Rate 7.97%
Current Price $60.38
% of Intrinsic Value 89.50%

SEI Investments Company is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the high PEmg and PB ratios. The Enterprising Investor has no initial concerns. As a result, all Enterprising Investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Fairly Valued after growing its EPSmg (normalized earnings) from $1.52 in 2014 to an estimated $2.47 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 7.97% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on the Benjamin Graham value investing formula, returns an estimate of intrinsic value within a margin of safety relative to the price.

At the time of valuation, further research into SEI Investments Company revealed the company was trading above its Graham Number of $25.4. The company pays a dividend of $0.58 per share, for a yield of 1% Its PEmg (price over earnings per share – ModernGraham) was 24.43, which was above the industry average of 21.47. Finally, the company was trading above its Net Current Asset Value (NCAV) of $5.12.

SEI Investments Company performs fairly well in the ModernGraham grading system, scoring a B-.

Stage 3: Information for Further Research

Net Current Asset Value (NCAV) $5.12
Graham Number $25.40
PEmg 24.43
Current Ratio 5.46
PB Ratio 6.16
Current Dividend $0.58
Dividend Yield 0.96%
Number of Consecutive Years of Dividend Growth 20

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Most Recent Balance Sheet Figures

Balance Sheet Information 6/1/2018
Total Current Assets $1,130,197,000
Total Current Liabilities $206,938,000
Long-Term Debt $0
Total Assets $1,890,706,000
Intangible Assets $411,915,000
Total Liabilities $299,824,000
Shares Outstanding (Diluted Average) 162,225,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $3.05
Dec2017 $2.49
Dec2016 $2.03
Dec2015 $1.96
Dec2014 $1.85
Dec2013 $1.64
Dec2012 $1.18
Dec2011 $1.11
Dec2010 $1.22
Dec2009 $0.91
Dec2008 $0.71
Dec2007 $1.28
Dec2006 $1.17
Dec2005 $0.92
Dec2004 $0.80
Dec2003 $0.66
Dec2002 $0.63
Dec2001 $0.55
Dec2000 $0.44
Dec1999 $0.30
Dec1998 $0.19

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $2.47
Dec2017 $2.12
Dec2016 $1.87
Dec2015 $1.71
Dec2014 $1.52
Dec2013 $1.31
Dec2012 $1.10
Dec2011 $1.06
Dec2010 $1.04
Dec2009 $0.97
Dec2008 $0.99
Dec2007 $1.07
Dec2006 $0.92
Dec2005 $0.77
Dec2004 $0.67
Dec2003 $0.57
Dec2002 $0.49

Recommended Reading:

Other ModernGraham posts about the company

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SEI Investments Company Valuation – Initial Coverage $SEIC

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Disclaimer:

The author did not hold a position in any company mentioned in this article at the time of publication and had no intention of changing that position within the next 72 hours.  See my current holdings here.  This article is not investment advice; any reader should speak to a registered investment adviser prior to making any investment decisions.  ModernGraham is not affiliated with the company in any manner.  Please be sure to review our detailed disclaimer.

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