Stifel: A Favorite in Financial Services

07/10/2017 2:56 am EST


Roy Ward

Chief Analyst, Cabot Benjamin Graham Value Investor

Stifel Financial (SF), which offers securities-related financial services in the U.S., Canada and Europe, is among our latest value-oriented buy recommendations, explains Roy Ward, editor of Cabot Benjamin Graham Value Investor.

One of the company’s subsidiary, Stifel Nicolaus, is a full-service retail and institutional brokerage and investment banking firm.

Three other subsidiaries include Thomas Weisel Partners, a growth focused investment banking firm; Century Securities Associates, an independent contractor broker-dealer firm; and Stifel Bank & Trust, a retail and commercial bank.

Stifel Financial was founded back in 1890 and has been headquartered in St. Louis, Missouri during its 127 years of existence.

It has acquired many businesses during its history. In recent years, the company purchased Keefe, Bruyette & Woods in 2013, Sterne Agee in 2015, Barclay’s U.S. Wealth Management division in 2015, and Eaton Partners in 2016.

Stifel recently acquired City Financial for an undisclosed amount. City Financial is an Indiana-based investment bank, specializing in public finance and wealth management.

Stifel reported strong first-quarter results. Revenue climbed 9% and EPS surged 37%. Stifel’s banking revenue surged 26%, and asset management and service fee revenue rose 13%.

Management forecast similar growth during the remainder of 2017. Results could easily exceed management’s forecast if President Trump reduces regulatory oversight and cuts income taxes. Also, rising interest rates could benefit the company.

Stifel shares sell at 16.3 times current EPS, and the company maintains a solid balance sheet. Net current asset value per share (NCAV) is 25.02, and SF’s price to NCAV is 1.83 which indicates SF shares are totally undervalued.

Net current asset value is calculated by subtracting all liabilities from current assets and dividing the result by the number of shares outstanding. I expect SF to rise 43% to my minimum sell price target of $66.93 within two years. Buy at $45.65 or below.

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