Company Profile (excerpt from Reuters): Stifel Financial Corp., incorporated on December 31, 1981, is a financial holding company. The Company operates through three segments: Global Wealth Management, Institutional Group and Other. The Company’s principal subsidiary is Stifel, Nicolaus & Company, Incorporated (Stifel), a full-service retail and institutional wealth management and investment banking company. Its principal activities are private client services, including securities transaction and financial planning services; institutional equity and fixed income sales, trading, research and municipal finance; investment banking services, including mergers and acquisitions, public offerings and private placements, and retail and commercial banking, including personal and commercial lending programs. The Global Wealth Management segment consists of two businesses, such as the Private Client Group and Stifel Bank. The Private Client Group includes branch offices and independent contractor offices of its broker-dealer subsidiaries located throughout the United States. These branches provide securities brokerage services, including the sale of equities, mutual funds, fixed income products and insurance, as well as offers banking products to its private clients through Stifel Bank, which provides residential, consumer and commercial lending, as well as the Federal Deposit Insurance Corporation (FDIC)-insured deposit accounts to customers of its broker-dealer subsidiaries and to the general public. The Institutional Group segment includes research, equity and fixed income institutional sales and trading, investment banking, public finance, and syndicate. The Other segment includes interest income from stock borrow activities and interest income, among others.
Downloadable PDF version of this valuation:
Stage 1: Is this company suitable for the Defensive Investor or the Enterprising Investor?
|Defensive Investor; must pass all 6 of the following tests.|
|1. Adequate Size of the Enterprise||Market Cap > $2Bil||$3,807,434,857||Pass|
|2. Earnings Stability||Positive EPS for 10 years prior||Pass|
|3. Dividend Record||Dividend Payments for 10 years prior||Fail|
|4. Earnings Growth||Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end||175.45%||Pass|
|5. Moderate PEmg Ratio||PEmg < 20||19.36||Pass|
|6. Moderate Price to Assets||PB Ratio < 2.5 OR PB*PEmg < 50||1.48||Pass|
|Enterprising Investor; must pass all 3 of the following tests, or be suitable for the Defensive Investor.|
|1. Earnings Stability||Positive EPS for 5 years prior||Pass|
|2. Dividend Record||Currently Pays Dividend||Pass|
|3. Earnings Growth||EPSmg greater than 5 years ago||Pass|
Stage 2: Determination of Intrinsic Value
|MG Growth Estimate||5.72%|
|MG Value based on 3% Growth||$39.61|
|MG Value based on 0% Growth||$23.22|
|Market Implied Growth Rate||5.43%|
|% of Intrinsic Value||97.04%|
Stifel Financial Corp is suitable for the Enterprising Investor but not the more conservative Defensive Investor. The Defensive Investor is concerned with the poor dividend history. 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 $1.98 in 2014 to an estimated $2.73 for 2018. This level of demonstrated earnings growth supports the market’s implied estimate of 5.43% annual earnings growth over the next 7-10 years. As a result, the ModernGraham valuation model, based on Benjamin Graham’s formula, returns an estimate of intrinsic value within a margin of safety relative to the price.
At the time of valuation, further research into Stifel Financial Corp revealed the company was trading below its Graham Number of $65.28. The company pays a dividend of $0.2 per share, for a yield of 0.4% Its PEmg (price over earnings per share – ModernGraham) was 19.36, which was below the industry average of 21.47, which by some methods of valuation makes it one of the most undervalued stocks in its industry.
Stifel Financial Corp performs fairly well in the ModernGraham grading system, scoring a B.
Stage 3: Information for Further Research
|Number of Consecutive Years of Dividend Growth||1|
|ModernGraham tagged articles||Morningstar|
|Google Finance||MSN Money|
|Yahoo Finance||Seeking Alpha|
Most Recent Balance Sheet Figures
|Balance Sheet Information||3/1/2018|
|Long-Term Debt & Capital Lease Obligation||$2,225,695,000|
|Shares Outstanding (Diluted Average)||81,789,000|
Earnings Per Share History
|Next Fiscal Year Estimate||$4.95|
Earnings Per Share – ModernGraham History
|Next Fiscal Year Estimate||$2.73|
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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.