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Broadridge Financial (BR) Gains From a Strong Business Model

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Broadridge Financial Solutions, Inc. (BR - Free Report) has an impressive Growth Score of A. This style score condenses all the essential metrics from the company’s financial statements to get a true sense of the quality and sustainability of its growth.

Broadridge Financial reported mixed third-quarter fiscal 2023 results, with earnings beating the Zacks Consensus Estimate and revenues missing.  Adjusted earnings of $3.21 per share beat the consensus mark by 3.6% and increased 21.1% year over year. Total revenues of $1.83 billion missed the consensus mark by 2.5% but rose 6.7% year over year. Moreover, recurring revenues of $1.26 billion increased 7% from the year-ago quarter’s level. The company generated closed sales of $90 million in the quarter, down 19% year over year.

Broadridge Financial has performed well on the bourses in the year-to-date period, growing 40.9%. Meanwhile, the industry has risen 7.2%, and the business services sector has advanced 12.3%

How Is Broadridge Doing?

The company offers SaaS-based BPO services, leveraging networks, data and digital capabilities to cut client costs. Broadridge maintains a strong business model with substantial recurring revenue streams. A significant portion of the income is derived from recurring fees, encompassing net new business, internal expansion and acquisition-related benefits.

In fiscal 2023, recurring revenues accounted for nearly 66% of the total revenues amounting to $3.99 billion. Impressively, revenues for fiscal 2023 reached $6.06 billion, reflecting a 6% year-over-year increase, while revenues for fiscal 2022 and 2021 came in at $5.71 billion and $4.99 billion, respectively, demonstrating year-over-year growth of around 14% and 10%, respectively.

Broadridge has been strategically enhancing its growth through acquisitions. In 2021, the acquisition of Itiviti extended its capabilities from the back office to the front office, enriching its multi-asset class solutions. Additionally, the acquisition of AdvisorStream has enabled BR to elevate its revenues and growth by delivering tailored and consistent client communications.

Furthermore, in February 2020, the acquisition of FundsLibrary significantly strengthened its pan-European regulatory communications and digital data platform. This expansion has been instrumental in supporting the entire lifecycle of fund data, documents and regulatory reporting for the investment industry.

Broadridge has consistently delivered dividends to its shareholders, with payments of $331 million in 2023, $290.7 million in 2022 and $261.7 million in 2021. These actions underscore the company's dedication to enhancing shareholder value and reflect its strong belief in its business. These endeavors not only bolster investor trust but also have a favorable impact on earnings per share.

Broadridge's current ratio at the end of the fourth quarter of fiscal 2023 was pegged at 0.58, lower than the current ratio of 1.35 reported at the end of the previous quarter and 1.01 reported at the end of the prior-year quarter. A decreasing current ratio is not desirable as it indicates that the company might have problems meeting its short-term obligations.

Broadridge primarily serves clients in the financial services industry. In each of its fiscal years 2023, 2022 and 2021, the largest single client accounted for roughly 7%, 7% and 6% of the company's consolidated revenues, respectively.

Zacks Rank & Other Stocks to Consider

BR carries a Zacks Rank #2 (Buy). Here are some other top-ranked stocks from the Business Service sector that may be considered by investors:

DocuSign (DOCU - Free Report) currently holds a Zacks Rank #2. It beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 27.1%. The Zacks Consensus Estimate for fiscal 2024 revenues and earnings indicates growth of 8.1% and 24.1%, respectively. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Automatic Data (ADP - Free Report) currently has a Zacks Rank #2. The company beat the Zacks Consensus Estimate in all the trailing four quarters, the average being 3.1%. The consensus estimate for fiscal 2023 revenues and earnings implies growth of 6.3% and 11.1%, respectively.

See More Zacks Research for These Tickers

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Broadridge Financial Solutions, Inc. (BR) - free report >>

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