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Franklin (BEN) Stock Gains 34% YTD: Is More Upside Left?

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Shares of Franklin Resources, Inc. (BEN - Free Report) have jumped 34.1% year to date, outperforming the industry’s rally of 23.1%. The stock has also surpassed the S&P 500’s rally of above 10% in the same time frame.

Franklin is perhaps benefiting from the improving economic conditions. The bullish sentiments can be attributed to extensive vaccination drive, stimulus packages and favorable economic data.

This, along with Franklin’s several efforts to reduce costs and undertake opportunistic expansion strategies, might continue supporting the company’s stellar performance.

Notably, the recent price movement of the stock compares favorably with the disappointing 2020 performance. The company’s shares lost 3.8% last year, mainly owing to the coronavirus outbreak.

Additionally, earnings estimates for this Zacks Rank #3 (Hold) stock has been witnessing upward revisions of late, reflecting analysts’ optimism regarding its growth potential. Over the past 30 days, the Zacks Consensus Estimate for Franklin’s 2021 and 2022 earnings has moved upward by 5% and 5.7%, respectively.

Year to Date Performance


So, will this bullish trend for Franklin continue for the rest of the year? Let’s check the company’s fundamentals before deciding.

Strong Distribution Platform: Franklin holds organic growth prospects in several areas. The company’s relatively strong distribution platform gives it a better chance to extract the most from its businesses. It has been an early entrant in many foreign markets, enjoying a first-mover advantage. Also, it tries to attract, retain and develop employees as well as invest tactically in systems and technology, which will provide a secure and stable environment.

Strategic Acquisitions: Franklin’s solid capital position enables it to undertake inorganic growth initiatives. Notably, the company concluded an all-cash acquisition deal with Legg Mason in July 2020, per which Franklin acquired the latter for $50 per share of common stock, accretive to earnings in fiscal 2021. Such acquisitions will support the company in improving and expanding its products and presence.

Undervalued Stock: With respect to the price/book and price/earnings ratios, Franklin seems undervalued. It has a P/B ratio of 1.45 and a P/E (F1) ratio of 10.59, both falling below the respective industry averages of 2.05 and 12.23.

The stock has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount.

Favorable Zacks Industry Rank: Franklin is part of that Zacks industry, which currently carries a Zacks Industry Rank #116 (placing it at the top 46% of more than 250 Zacks industries).

The Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates outperformance in the near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.

Key Picks

Artisan Partners Asset Management Inc. (APAM - Free Report) has been witnessing upward estimate revision for 2021 over the past 30 days. The company’s shares have rallied 1% so far this year. It carries a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

KeyCorp’s (KEY - Free Report) shares have gained more than 40% so far this year. Further, the company’s earnings estimates for the ongoing year have moved north in the past 30 days. It currently has a Zacks Rank of 2.

UMB Financial Corporation (UMBF - Free Report) has been witnessing upward estimates revision for the current-year over the past 30 days. Shares of this Zacks #2 Ranked stock have gained more than 40% so far this year.

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