Raymond James Financial, Inc. (RJF - Free Report) can be a solid bet now, on the back of its organic and inorganic growth strategies, which have placed it well for the future. Further, consistent top-line growth, improving earnings performance, and a strong capital and liquidity profile will support its profitability.
Nonetheless, a competitive business environment, lack of geographic diversification and escalating costs pose near-term concerns for Raymond James. Despite these adverse factors, this Zacks Rank #1 (Strong Buy) stock seems like an attractive investment option right now as it has been witnessing solid upward estimate revisions.
Also, its shares have rallied 19.6% so far this year, outperforming the industry’s gain of 2.6%.
Why is the Stock an Attractive Choice?
Synergies from Acquisitions: Raymond James’ growth has been reflected in several successful acquisitions over the last few years. Specifically, in calendar year 2016, the company acquired German-based Mummert & Company Corporate Finance GmbH, Canadian investment firm MacDougall, MacDougall & MacTier Inc. (also known as 3Macs) and the U.S. Private Client Services unit of Deutsche Asset & Wealth Management. Also, in Apr 2017, it agreed to acquire UMB Financial’s subsidiary. These deals are expected to support the company’s profitability going forward.
Earnings Per Share Growth: Over the past three to five years, Raymond James witnessed earnings per share (EPS) growth of 40.7% compared with 18.1% for the industry. Notably, the company has a strong earnings surprise history, having delivered positive surprises in all the trailing four quarters with an average beat of 13.4%.
Further, the company’s earnings are projected to grow 30.2% in fiscal 2017, higher than 18.1% predicted for the industry. Also, the company’s long-term (three to five years) estimated EPS growth rate of 17.0% promises rewards for investors in the long run.
Revenue Strength: Raymond James remains focused on enhancing revenue growth. Its strategy to grow inorganically is paying off well. Also, the company has been witnessing a rise in loan balances.
Further, the company’s projected sales growth (F1/F0) of 17.5% (compared with nil growth for the industry) ensures continuation of the upward trend in revenues.
Stock Seems Undervalued: Raymond James stock looks undervalued with respect to its Price-to-Earnings (P/E) and Price-to-Sales (P/S) ratios. It has a P/E ratio of 16.58 compared with the industry average of 17.94. Also, the company’s P/S ratio of 1.88 is below the industry average of 2.14.
Other Stocks Worth a Look
Some other stocks worth considering in the same industry include E*TRADE Financial Corporation (ETFC - Free Report) , LPL Financial Holdings Inc. (LPLA - Free Report) and TD Ameritrade Holding Corporation (AMTD - Free Report) .
Earnings estimates for E*TRADE have been revised 11.7% upward for 2017 over the past 30 days. Its share price has risen more than 15.9% over the last six months. It currently boasts a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
LPL Financial also sports a Zacks Rank #1. Its earnings estimates have been revised upward by 6.5% for the current year in the past 30 days. Also over the last six months, its share price increased 12.5%.
TD Ameritrade, with a Zacks Rank #2 (Buy), recorded an upward earnings estimate revision of 2.4% for the current year in the past 30 days. Also, its share price has seen a 6.3% rise over the last six months.
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