Raymond James RJF is well positioned for organic and inorganic growth given its solid balance sheet and capital position. Also, the company’s steady capital deployment actions will enhance shareholder value.
Moreover, the Zacks Consensus Estimate for current fiscal year earnings has moved marginally upward over the past 60 days, reflecting analysts’ optimism about its growth potential. As a result, the stock currently has a Zacks Rank #2 (Buy).
Further, shares of Raymond James have rallied 12.5% so far this year, outperforming the industry’s growth of 11%.
Here are some of the factors that make Raymond James stock a solid pick:
Earnings growth: Over the past three to five years, Raymond James witnessed EPS growth of 18.5%, higher than the industry’s growth of 14.2%. The momentum is expected to continue as the company’s earnings are projected to rise 10.5% and 8.4% in fiscal 2019 and fiscal 2020, respectively.
Also, its long-term (three to five years) estimated EPS growth rate of 17% promises rewards for investors.
Revenue strength: Raymond James remains focused on enhancing revenue growth. The company’s revenues witnessed a CAGR of 10.6% in the last five years (2014-2018). Its strategy to grow inorganically is paying off well. Also, the company has been witnessing a rise in loan balances. Its projected sales growth of 4% for 2019 and 4.1% for 2020 ensures continuation of the upward trend.
Superior Return on Equity (ROE): Raymond James’ ROE is 15.86%, higher than the industry average of 14.35%. This reflects its superiority in terms of utilizing funds.
Synergies from acquisitions: Raymond James has won several strategic deals over the past few years, driven by strong liquidity position. Management looks forward to growing inorganically with an aim to further strengthen Private Client Group and Asset Management segments.
In February, the company entered into an agreement to increase its stake in ClariVest Asset Management from 45% to 100%. Earlier, in January, the company announced the deal to buy Silver Line Advisors. In 2017, it had acquired UMB Financial’s subsidiary. Also, the company has expanded into Europe and Canada with the help of opportunistic acquisitions. These deals poise Raymond James well for future growth.
Stock seems undervalued: Raymond James stock looks undervalued with respect to its PEG ratio. It has a PEG ratio of 0.68 compared with the industry average of 1.08.
Also, the stock currently has a Value Score of B. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount. 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 Worth a Look
Some other finance stocks worth considering are E*TRADE Financial Corporation ETFC, LPL Financial Holdings Inc. LPLA and Credit Acceptance Corporation CACC. All these stocks carry a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings estimates for E*TRADE Financial have been revised marginally upward for 2019 over the past 60 days. Its share price has rallied 9.5% so far this year.
LPL Financial’s earnings estimates have been revised upward by 2.1% for the current year over the past 60 days. Also, so far this year, its share price has increased 18.4%.
Credit Acceptance has witnessed upward earnings estimate revision of 2.2% for the current fiscal year over the past 60 days. Also, its share price has seen a 19.2% rise so far this year.
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