Siebert Financial Corp (NASDAQ:SIEB), a USD$79.51M small-cap, operates in the capital markets industry, which has recently been facing serious existential threats resulting from potential disintermediation and disruption from new technology. Financial services analysts are forecasting for the entire industry, a positive double-digit growth of 11.34% in the upcoming year , and a massive growth of 52.09% over the next couple of years. This rate is larger than the growth rate of the US stock market as a whole. Today, I’ll take you through the sector growth expectations, and also determine whether SIEB is a laggard or leader relative to its financial sector peers. Check out our latest analysis for Siebert Financial
What’s the catalyst for SIEB’s sector growth?
The threat of disintermediation in the capital markets industry is both real and imminent, taking profits away from traditional incumbent financial institutions. In the previous year, the industry saw growth in the teens, beating the US market growth of 10.30%. SIEB lags the pack with its sustained negative earnings over the past couple of years. The company’s outlook seems uncertain, with a lack of analyst coverage, which doesn’t boost our confidence in the stock. This lack of growth and transparency means SIEB may be trading cheaper than its peers.
Is SIEB and the sector relatively cheap?
The capital markets sector’s PE is currently hovering around 18x, in-line with the US stock market PE of 22x. This illustrates a fairly valued sector relative to the rest of the market, indicating low mispricing opportunities. Furthermore, the industry returned a similar 11.73% on equities compared to the market’s 10.06%. Since SIEB’s earnings doesn’t seem to reflect its true value, its PE ratio isn’t very useful. A loose alternative to gauge SIEB’s value is to assume the stock should be relatively in-line with its industry.
What this means for you:
Are you a shareholder? SIEB recently delivered an industry-beating growth rate in earnings, which is a positive for shareholders. If you’re bullish on the stock and well-diversified by industry, you may decide to hold onto SIEB as part of your portfolio. However, if you’re relatively concentrated in capital markets, you may want to value SIEB based on its cash flows to determine if it is overpriced based on its current growth outlook.
Are you a potential investor? If SIEB has been on your watchlist for a while, now may be the time to enter into the stock, if you like its ability to deliver growth and are not highly concentrated in the capital markets industry. Before you make a decision on the stock, take a look at SIEB’s cash flows and assess whether the stock is trading at a fair price.
For a deeper dive into Siebert Financial’s stock, take a look at the company’s latest free analysis report to find out more on its financial health and other fundamentals. Interested in other financial stocks instead? Use our free playform to see my list of over 600 other financial companies trading on the market.
To help readers see pass the short term volatility of the financial market, we aim to bring you a long-term focused research analysis purely driven by fundamental data. Note that our analysis does not factor in the latest price sensitive company announcements.
The author is an independent contributor and at the time of publication had no position in the stocks mentioned.