Stifel Financial Update: Decreasing Our Fair Value Estimate To $72
We are decreasing our fair value estimate for Stifel Financial SF to $72 per share from $81. Our fair value estimate implies an adjusted forward price/earnings multiple of about 12 times and a price/book ratio of 1.6 times. Of the net $9 decrease in our fair value estimate, most of it was due to forecasting lower institutional group revenue along with a related reduction in our normalized operating margin for the company. We currently assess the shares to be about fairly valued.
We continue to believe that wealth management revenue should remain fairly strong for the company for the foreseeable future. However, during 2020 up through part of 2022 Stifel had abnormally high institutional revenue from a strong a capital markets environment and a robust trading one. While the market has recently become more positive on the U.S. economy and institutional group revenue should be returning to growth the next several quarters, it could take still take years for Stifel’s institutional group to report earnings close to what it reported during the 2020 to early 2022 period.
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