Stifel Financial Corp. (SF - Free Report) appears to be a promising bet now given its solid organic growth and efforts to expand inorganically. In addition, interest rate hikes and improving economy are anticipated to further stabilize its top line.
Further, analysts seem to be optimistic about its prospects as the stock is witnessing upward estimate revisions. Over the last 30 days, the Zacks Consensus Estimate for the current year has risen nearly 1% to $5.05. Backed by these upward estimate revisions, the company currently carries a Zacks Rank #2 (Buy).
Also, Stifel Financial has an impressive earnings surprise history. The bank delivered an average positive earnings surprise of 24.8% in the trailing four quarters.
Additionally, the stock has gained 15.9% in the past six months outperforming 14.3% growth recorded by the industry.
Why is Stifel Financial a Solid 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 hike will enable 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.
Inorganic growth strategies: Stifel Financial’s strong balance sheet position enables it to undertake opportunistic expansion plans. In May 2018, the company announced the acquisition of Business Bancshares and its wholly owned subsidiary, with a view to fortify its presence in the St. Louis region and expand banking capabilities.
Strong organic growth: Stifel Financial’s net revenues witnessed a 10.4% compounded annual growth rate over the last five years, ending 2017. The company’s projected sales growth rates of 7.9% and 7% for 2018 and 2019, respectively, indicate continued upward momentum in revenues.
Earnings growth: Stifel Financial witnessed earnings growth of 6.4% over the last three-five years. Continuing the momentum, its earnings are expected to grow at the rate of 26.6% for 2018 and 9.9% for 2019.
In addition, 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 13.14% compared with the industry average 8.75%, highlights the company’s commendable position over its peers.
Stock seems undervalued: Stifel Financial’s P/E and P/B ratios are 10.57 and 1.38 compared to the industry average of 15.98 and 1.76, respectively. Also, the stock has a Value Score of A. Based on these ratios, the stock seems undervalued. Our research shows that stocks with a Style Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Other Stocks to Consider
Other stocks worth considering in the same industry include LPL Financial Holdings (LPLA - Free Report) , Investment Technology Group (ITG - Free Report) and Evercore (EVR - Free Report) . All these stocks sport a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for LPL Financial’s current-year earnings was revised slightly upward over the last 30 days. Also, its share price has seen a 58.4% rise in the past year.
Investment Technology’s earnings estimates have been revised slightly upward for the current year, over the last 30 days. Also, in the past six months, its share price has increased 10%.
Earnings estimates for Evercore have moved up 2.7% for the current year, over the last 60 days. Also, its share price has seen a 53.2% rise in the past year.
Wall Street’s Next Amazon
Zacks EVP Kevin Matras believes this familiar stock has only just begun its climb to become one of the greatest investments of all time. It’s a once-in-a-generation opportunity to invest in pure genius.
Click for details >>