With the recently implemented cost-reduction initiatives and the company's balance sheet growth, Stifel Financial Corp.SF appears a promising buying opportunity now. Further, the recent interest rate hike is anticipated to bring more stability to top-line generation.
Though increasing risk and compliance requirements remain a concern for Stifel Financial; given the strictly regulated nature of banking operations, management is taking steps to tackle expense growth. This, in turn, is anticipated to make the growth path smoother.
Therefore, it's a good idea to add stocks with robust fundamentals and long-term growth opportunities to your portfolio, at the current level.
In addition, Stifel Financial's shares have gained 18.2% year to date, compared with the 23.3% growth in the Zacks categorized Investment Bank industry.
Why is Stifel Financial a Must Buy
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 allow 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 hike.
Strong Organic Growth: The company's net revenue recorded a 13.3% compounded annual growth rate (CAGR) over the last five years, ending 2015 and also depicted an uptrend in the first nine months of 2016. The company's projected sales growth (F1/F0) of 9.4%, as against the nil industry average, indicates consistent upward momentum in revenues.
Favorable Zacks Rank: Stifel Financial currently carries a Zacks Rank #2 (Buy). The bullish rank is driven by upward earnings estimate revisions for the last 60 days. For 2016, the Zacks Consensus Estimate advanced 4.5% to $2.58; while for 2017, it climbed 1.8% to $2.85.
Stock is Undervalued: Stifel Financial has a P/B ratio of 1.35x, compared to the industry average of 1.56x. Based on this ratio, the stock seems undervalued.
Stocks to Consider
TD Ameritrade Holding CorporationAMTD has been witnessing upward estimate revisions for the last 30 days. Further, the stock has surged over 25.4% so far, this year. It currently flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here.
The Charles Schwab CorporationSCHW has been recording upward estimate revisions for the last 30 days. In addition, the company's shares have risen nearly 20.2% so far, this year. It currently carries a Zacks Rank #2.
LPL Financial Holdings Inc.LPLA has been witnessing upward estimate revisions for the last 60 days. Over the last six months, the company's share price has been up more than 56.1%. It also carries a Zacks Rank #2.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.