Given the growing demand for different investment opportunities amid investors’ inclination toward improving their capital and the rapid adoption of advanced digital technologies, the investment brokerage industry’s growth prospects appear promising.
Given the industry’s tailwinds, quality financial stocks PJT Partners Inc. (PJT), Evercore Inc. (EVR), and Stifel Financial Corp. (SF) could be ideal watchlist additions now.
Despite several macroeconomic headwinds, the financial services industry, ranging from investment brokerage to insurance to real estate to banking and capital markets, is well-positioned to remain resilient and experience robust growth in the long run, propelled by strong demand for financial services among individuals and enterprises.
Investment brokerage, the financial sector’s primary segment, is expected to perform well in the foreseeable years. Companies in this industry provide securities brokerage services and related tech-based financial services to retail investors, traders, and independent investment advisors. Also, they offer advisory services, facilitating corporate mergers and other deals.
Due to investors’ high demand to improve their capital, investment opportunities are increasing, driving the growth of the securities brokerage industry. Some popular investment options include stocks, bonds, real estate, mutual funds, and more. The global securities brokerage and stock exchanges market is projected to reach $3.48 trillion by 2030, growing at an 8.7% CAGR.
Meanwhile, the US securities brokerage market is expected to total $232.50 billion by 2028, expanding at a CAGR of 4.2% during the forecast period (2023-2028).
Further, the growing adoption of robo-advisors for managing investment portfolios for investors is the major trend boosting the securities brokerage market’s growth. Robo-advisors use artificial intelligence (AI) and machine learning algorithms to analyze market data, identify potential investment opportunities, and offer personalized investment advice.
Some key advantages of robo-advisors are the automation and efficiency of investment operations, reduced costs, efficient portfolio personalization and customization, and ensured investor protection and compliance with applicable laws and regulations.
The global e-brokerage market is estimated to reach $31.08 billion by 2032, growing at a CAGR of 10.6%.
Given these encouraging trends, let’s look at the fundamentals of the three Investment Brokerage stocks, beginning with the third choice.
Stock #3: PJT Partners Inc. (PJT)
PJT operates as an investment bank that offers various strategic and capital markets advisory, restructuring and special situations, and shareholder advisory services to entities like corporations, financial sponsors, institutional investors, and governments worldwide.
On November 29, PJT’s Board of Directors announced a quarterly dividend of $0.25 per share of Class A common stock. The dividend will be paid on December 20, 2023, to Class A common stockholders of record on December 6, 2023. The annual dividend of $1 translates to a yield of 1% on the prevailing share price.
Moreover, the company’s dividend payouts have increased at a CAGR of 38% over the past five years.
PJT’s trailing-12-month gross profit margin of 96.10% is 59.2% higher than the 60.37% industry average. Likewise, the stock’s trailing-12-month ROCE of 47.75% is 309.1% higher than the industry average of 11.67%. But its trailing-12-month net income margin of 7.37% is 70.8% lower than the industry average of 25.21%.
In terms of forward non-GAAP P/E, PJT is trading at 31.82x, 204.3% higher than the industry average of 10.46x. Likewise, the stock’s forward Price/Book multiple of 15.21 is significantly higher than the industry average of 1.21.
For the third quarter that ended September 30, 2023, PJT’s revenues increased 4.6% year-over-year to $278.40 million. Advisory revenues grew 8.7% year-over-year to $244.13 million. The company’s interest income and other was $7.60 million, up from $2 million in the prior year’s quarter.
However, the company’s adjusted net income came in at $32.11 million, or $0.78 per share, compared to $39.98 million, or $0.96 per share, respectively.
Analysts expect PJT’s revenue for the fourth quarter (ending December 2023) to increase 6.3% year-over-year to $297.62 million. However, the company’s EPS for the ongoing quarter is expected to decline 22.1% year-over-year to $0.84.
For the fiscal year ending December 2024, the company’s revenue and EPS are estimated to grow 14.1% and 44% year-over-year to $1.28 billion and $4.52, respectively.
PJT’s stock has gained 36.9% over the past six months and 32.3% year-to-date to close the last trading session at $99.96.
PJT’s mixed outlook is reflected in its POWR Ratings. The stock has an overall rating of C, which translates to a Neutral in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, each weighted to an optimal degree.
The stock has a C grade for Stability and Value. Within the Investment Brokerage industry, PJT is ranked #5 among 20 stocks.
Click here to access additional ratings of PJT for Growth, Quality, Sentiment, and Momentum.
Stock #2: Evercore Inc. (EVR)
EVR operates as an independent investment banking advisory firm internationally. The company functions through two segments: Investment Banking & Equities and Investment Management. It offers strategic advisory services, private capital advisory services, wealth management services, and more.
On December 8, EVR paid a quarterly dividend of $0.76 per share to common stockholders of record on November 24, 2023. EVR pays an annual dividend of $3.04, which translates to a yield of 1.85% at the current share price. Its four-year average dividend yield is 2.61%.
Additionally, the company’s dividend payouts have increased at a CAGR of 9.6% over the past five years. Also, Evercore has raised its dividends for 16 consecutive years.
During the third quarter of 2023, EVR repurchased about 17 thousand shares from employees for the net settlement of stock-based compensation awards. The repurchase was made at an average price per share of $135.28. Also, 0.3 million shares were repurchased at an average price per share of $137.79 in open market transactions.
EVR’s trailing-12-month gross profit margin of 94.30% is 56.2% higher than the 60.37% industry average. Also, the stock’s trailing-12-month ROCE and ROTA of 21.86% and 9.71% compared favorably to the industry averages of 11.67% and 1.16%, respectively.
In terms of forward non-GAAP P/E, EVR is trading at 26.76x, 155.9% higher than the industry average of 10.46x. In addition, the stock’s forward Price/Book of 4.30x is considerably higher than the industry average of 1.21x. And its trailing-12-month Price/Cash Flow of 14.88% is 93% higher than the industry average of 7.71%.
EVR’s revenue has grown at a CAGR of 7.4% over the past three years. The company’s net income and EPS have increased 10% and 11.8% over the same timeframe, while its total assets have improved at a CAGR of 6.8%.
For the third quarter that ended September 30, 2023, EVR’s revenues from Underwriting Fees grew 7.4% year-over-year to $30.81 million, and revenues from Asset Management and Administration Fees were $17.30 million, up 10.6% year-over-year. But the company’s adjusted operating income came in at $82.70 million, a decrease of 41.1% from the previous year’s quarter.
Also, adjusted net income attributable to EVR and EPS were $55.50 million and $1.30, down 41.7% and 40.9% year-over-year, respectively.
Street expects EVR’s EPS for the fourth quarter (ending December 2023) to decrease 50.9% year-over-year to $1.72, and its revenue is expected to decline 15.9% year-over-year to $703.80 million in the quarter. However, the company has surpassed the consensus EPS and revenue estimates in three of the trailing four quarters.
Furthermore, the company’s EPS and revenue for the fiscal year 2024 are estimated to increase by 20.8% and 75.8% from the previous year to $10.80 and $2.86 billion, respectively.
Shares of EVR have surged 32.6% over the past six months and 49.9% over the past year to close the last trading session at $164.48.
EVR’s POWR Ratings reflect its mixed fundamentals. The stock has an overall rating of C, which equates to a Neutral in our proprietary rating system.
EVR has a C grade for Stability, Sentiment, and Value. It is ranked #4 out of 20 stocks in the Investment Brokerage industry.
In addition to the POWR Ratings we’ve stated above, we also have EVR ratings for Growth, Momentum, and Quality. Get all EVR ratings here.
Stock #1: Stifel Financial Corp. (SF)
SF is a financial services and bank holding company that offers retail & institutional wealth management and investment banking services to individual investors, corporations, municipalities, and institutions worldwide. The company operates through three segments: Global Wealth Management; Institutional Group; and Other.
On November 15, SF declared a cash dividend on shares of its common stock of $0.36 per share and a quarterly cash dividend on the outstanding shares of its 6.25% non-cumulative perpetual preferred stock, series B, 6.125% non-cumulative perpetual preferred stock, series C, and 4.50% non-cumulative perpetual preferred Stock, series D.
Each of these dividends is payable on December 15, 2023, to shareholders of record at the close of business on December 1, 2023.
SF pays an annual dividend of $1.44, which translates to a yield of 2.20% at the current share price. Its four-year average dividend yield is 1.38%. Moreover, the company’s dividend payouts have increased at a CAGR of 47% over the past three years. Stifel has raised its dividends for five consecutive years.
SF’s trailing-12-month gross profit margin of 94.44% is 56.4% higher than the 60.37% industry average. But the stock’s trailing-12-month net income margin and ROCE of 12.49% and 10.98% are lower than the industry averages of 25.21% and 11.67%, respectively.
In terms of forward Price/Sales, SF is trading at 1.59x, 40.6% lower than the industry average of 2.68x. But the stock’s forward non-GAAP P/E and Price/Book of 14x and 1.50x are higher than the respective industry averages of 10.46x and 1.21x.
SF’s revenue and net income have grown at respective CAGRs of 6.3% and 6.4% over the past three years. The company’s EPS has increased 5.7% over the same period, while its total assets have improved at a CAGR of 14.1%.
During the third quarter that ended September 30, 2023, SF’s revenues from commissions and asset management increased 3.8% and 10.8% year-over-year to $167.08 million and $333.13 million, respectively. The company’s total assets amounted to $37.88 billion as of September 30, 2023, compared to $37.30 billion as of June 30, 2023.
However, the company’s non-GAAP net income was $67.41 million, or $0.60 per common share, compared to $150.75 million, or $1.29 per common share in the previous year’s period, respectively.
Analysts expect SF’s revenue and EPS for the fourth quarter (ending December 2023) to decrease 0.7% and 12.5% year-over-year to $1.11 billion and $1.38. Also, the company missed the consensus revenue and EPS estimates in each of the trailing four quarters, which is disappointing.
However, for the fiscal year ending December 2024, the company’s revenue is expected to be $4.64 billion, while the consensus EPS estimate of $6.26 for the same period indicates an improvement of 30.1% year-over-year.
Over the past six months, the stock has gained 12.8% and 13.4% year-to-date to close the last trading session at $67.43.
SF’s POWR Ratings reflect its mixed prospects. The stock has an overall grade of C, translating to a Neutral in our proprietary rating system.
SF has a C grade for Quality, Value, and Growth. It is ranked #3 among 20 stocks within the same industry.
To see the other ratings of SF for Sentiment, Momentum, and Stability, click here.
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SF shares were unchanged in premarket trading Friday. Year-to-date, SF has gained 18.22%, versus a 24.34% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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