With cost-reduction initiatives and remarkable balance-sheet growth, Stifel Financial Corp. (SF - Free Report) appears to be a solid bet now. Further, the recent interest rate hikes are anticipated to further stabilize the top line.
Though the brokerage business is currently challenging, investments in investment banking franchise are likely to have further positive impact on the bank’s financials.
Therefore, it’s a good idea to add stocks with robust fundamentals and long-term growth opportunities to your portfolio, at the current level.
Additionally, Stifel Financial’s shares gained 8.7% over the past six months compared with 10.7% growth recorded by the industry.
Why is Stifel Financial an Attractive Pick?
Benefit from Rate Hike: With a rise in rates, brokerage firms are likely to engage in more investment activities. As brokerage firms earn interest income on un-invested cash in customer accounts, this rate rise will enable the brokerage firms to invest at higher rates. As Stifel Financial currently derives some portion of its revenues from net interest income, the company is set to benefit from the recent rate hikes.
Strong Organic Growth: The company’s net revenues witnessed a 12.4% compounded annual growth rate (CAGR) over the last five years, ending 2016, and also displayed an uptrend in the first nine months of 2017. The company’s projected sales growth (F1/F0) of 11.3%, as against the nil industry average, indicates continued upward momentum in revenues.
Earnings Growth: Stifel Financial witnessed earnings growth of 2.5% in the last three-five years. In addition to this, the company’s long-term (three-five years) estimated EPS growth rate of 12% promises rewards for investors over the long run.
Superior Return on Equity (ROE): Stifel Financial’s ROE of 9.8%, as compared with the industry average 9.4%, highlights the company’s commendable position over its peers.
Favorable Zacks Rank: Stifel Financial currently carries a Zacks Rank #2 (Buy). The bullish rank has been driven by upward earnings estimate revisions for the past month. For 2017, the Zacks Consensus Estimate moved up 1.5% to $3.44, while for 2018, it climbed 2.7% to $3.85.
Stock is Undervalued: Stifel Financial has P/E and P/B ratios of 15.22 and 1.29, compared to the industry average of 18.43 and 1.69, respectively. Based on these ratios, the stock seems undervalued.
Stocks to Consider
Enterprise Financial Services Corporation (EFSC - Free Report) has been witnessing upward estimate revisions for the last 30 days. Additionally, the stock inched up more than 1.3% over the past six months. It currently carries a Zacks Rank of 2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
First Financial Bancorp (FFBC - Free Report) has been witnessing upward estimate revisions for the past month. Also, the company’s shares have risen nearly 4.7% in a year’s time. It holds a Zacks Rank of 2, at present.
JMP Group LLC (JMP - Free Report) has been witnessing upward estimate revisions for the last 30 days. The company’s share price has been up around 5% in six months’ time. It also carries a Zacks Rank of 2.
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