Raymond James Financial Valuation – February 2019 $RJF

Company Profile (excerpt from Reuters): Raymond James Financial, Inc. (RJF), incorporated on January 24, 1974, is a financial holding company. The Company’s subsidiaries include Raymond James & Associates, Inc. (RJ&A), Raymond James Financial Services, Inc. (RJFS), Raymond James Financial Services Advisors, Inc. (RJFSA), Raymond James Ltd. (RJ Ltd.), Eagle Asset Management, Inc. (Eagle), and Raymond James Bank, N.A. (RJ Bank). The Company operates through five segments: Private Client Group (PCG), Capital Markets, Asset Management, RJ Bank and the Other segment. The Private Client Group segment includes the retail branches of the Company’s broker-dealer subsidiaries located throughout the United States, Canada and the United Kingdom. The Capital Markets segment includes institutional sales and trading in the United States, Canada and Europe. The Asset Management segment includes the operations of Eagle, the Eagle Family of Funds, Cougar Global Investments Limited (Cougar), the asset management operations of RJ&A, trust services of RJ Trust, and other fee-based asset management programs. RJ Bank segment provides corporate loans, securities based loans (SB) and residential loans. The Other segment includes principal capital and private equity activities, as well as certain corporate costs of RJF.


Downloadable PDF version of this valuation:

ModernGraham Valuation of RJF – February 2019

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 all 6 of the following tests.
1. Adequate Size of the Enterprise Market Cap > $2Bil $11,570,757,649 Pass
2. Earnings Stability Positive EPS for 10 years prior Pass
3. Dividend Record Dividend Payments for 10 years prior Pass
4. Earnings Growth Increase of 33% in EPS in past 10 years using 3 year averages at beginning and end 171.22% Pass
5. Moderate PEmg Ratio PEmg < 20 15.25 Pass
6. Moderate Price to Assets PB Ratio < 2.5 OR PB*PEmg < 50 1.94 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

EPSmg $5.38
MG Growth Estimate 12.03%
MG Value $175.15
Opinion Undervalued
MG Grade B
MG Value based on 3% Growth $77.98
MG Value based on 0% Growth $45.71
Market Implied Growth Rate 3.37%
Current Price $81.99
% of Intrinsic Value 46.81%

Raymond James Financial, Inc. qualifies for both the Defensive Investor and the Enterprising Investor. In fact, the company meets all of the requirements of both investor types, a rare accomplishment indicative of the company’s strong financial position . The Enterprising Investor has no initial concerns. As a result, all value investors following the ModernGraham approach should feel comfortable proceeding with the analysis.

As for a valuation, the company appears to be Undervalued after growing its EPSmg (normalized earnings) from $2.98 in 2015 to an estimated $5.38 for 2019. This level of demonstrated earnings growth outpaces the market’s implied estimate of 3.37% 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 above the price.

At the time of valuation, further research into Raymond James Financial, Inc. revealed the company was trading above its Graham Number of $81.73. The company pays a dividend of $1.1 per share, for a yield of 1.3% Its PEmg (price over earnings per share – ModernGraham) was 15.25, which was below the industry average of 20.29, which by some methods of valuation makes it one of the most undervalued stocks in its industry.

Raymond James Financial, Inc. performs fairly well in the ModernGraham grading system, scoring a B.

Stage 3: Information for Further Research

Graham Number $81.73
PEmg 15.25
PB Ratio 1.94
Dividend Yield 1.34%
TTM Dividend $1.10
Number of Consecutive Years of Dividend Growth 6

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Most Recent Balance Sheet Figures

Balance Sheet Information 12/1/2018
Long-Term Debt & Capital Lease Obligation $2,448,000,000
Total Assets $38,544,000,000
Intangible Assets $633,000,000
Total Liabilities $32,319,000,000
Shares Outstanding (Diluted Average) 147,300,000

Earnings Per Share History

EPS History
Next Fiscal Year Estimate $6.79
Sep2018 $5.75
Sep2017 $4.33
Sep2016 $3.65
Sep2015 $3.43
Sep2014 $3.32
Sep2013 $2.58
Sep2012 $2.20
Sep2011 $2.19
Sep2010 $1.83
Sep2009 $1.25
Sep2008 $1.97
Sep2007 $2.11
Sep2006 $1.85
Sep2005 $1.33
Sep2004 $1.15
Sep2003 $0.78
Sep2002 $0.71
Sep2001 $0.88
Sep2000 $1.19
Sep1999 $0.78

Earnings Per Share – ModernGraham History

EPSmg History
Next Fiscal Year Estimate $5.38
Sep2018 $4.48
Sep2017 $3.72
Sep2016 $3.29
Sep2015 $2.98
Sep2014 $2.65
Sep2013 $2.21
Sep2012 $1.98
Sep2011 $1.87
Sep2010 $1.74
Sep2009 $1.70
Sep2008 $1.84
Sep2007 $1.67
Sep2006 $1.35
Sep2005 $1.06
Sep2004 $0.93
Sep2003 $0.84

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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.

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