Is It Too Late To Consider WisdomTree (WT) After Its Strong Share Price Run?

• If you are wondering whether WisdomTree's recent share price leaves much value still on the table, you are not alone. This article is built to help you make sense of what the current price might imply.
• WisdomTree's share price recently closed at US$16.23, with returns of 23.8% over 30 days, 29.7% year to date, 68.8% over 1 year and a very large gain over 3 and 5 years.
• Recent coverage has focused on WisdomTree's position within the diversified financials space and how investors are reacting to its product lineup and market presence. This context is important because it helps explain why sentiment around the stock and its pricing has shifted over different time frames.
• Right now, WisdomTree scores 1 out of 6 on our valuation checks for being undervalued. You can see that breakdown in our valuation score. Next, we will walk through common valuation approaches for WisdomTree, and then finish with a more complete way to think about what the stock might be worth.

WisdomTree scores just 1/6 on our valuation checks. See what other red flags we found in the full valuation breakdown.

Approach 1: WisdomTree Excess Returns Analysis

The Excess Returns model looks at how much profit a company can generate above the return that shareholders require, then capitalizes those “excess” profits into an estimated per share value.

For WisdomTree, the model uses a Book Value of $3.02 per share and a Stable EPS of $0.49 per share, based on the median return on equity from the past 5 years. The Average Return on Equity used is 17.06%, while the Cost of Equity is $0.26 per share. The difference between the earnings power and that cost is the Excess Return of $0.24 per share. The Stable Book Value input is $2.88 per share, taken from the median book value over the past 5 years.

Feeding these inputs into the Excess Returns framework results in an estimated intrinsic value of about $7.05 per share. Compared with the recent share price of US$16.23, this implies the stock is 130.3% overvalued according to this model.

Result: OVERVALUED

Our Excess Returns analysis suggests WisdomTree may be overvalued by 130.3%. Discover 862 undervalued stocks or create your own screener to find better value opportunities.

Head to the Valuation section of our Company Report for more details on how we arrive at this Fair Value for WisdomTree.

Approach 2: WisdomTree Price vs Earnings

For a profitable company like WisdomTree, the P/E ratio is a useful shorthand for what the market is willing to pay for each dollar of earnings. It ties the share price directly to current earnings, which many investors watch closely when judging whether a stock looks expensive or reasonable.

What counts as a “normal” P/E often reflects how the market views a company’s growth potential and risk. Higher expected growth or lower perceived risk can support a higher P/E, while slower expected growth or higher risk can point to a lower one. WisdomTree currently trades on a P/E of 20.34x, compared with a Capital Markets industry average of 22.79x and a peer average of 19.17x, so it sits between its peers and the broader industry.

Simply Wall St’s Fair Ratio of 16.63x is a proprietary estimate of what WisdomTree’s P/E might be given factors such as its earnings profile, industry, profit margins, market cap and risk characteristics. This can be more tailored than a simple peer or industry comparison, which may not fully reflect company specific traits. Since WisdomTree’s current P/E of 20.34x is above the Fair Ratio of 16.63x, the shares screen as overvalued on this metric.

Result: OVERVALUED

P/E ratios tell one story, but what if the real opportunity lies elsewhere? Discover 1428 companies where insiders are betting big on explosive growth.

Upgrade Your Decision Making: Choose your WisdomTree Narrative

Earlier we mentioned that there is an even better way to understand valuation, so let us introduce you to Narratives, which let you attach a clear story to the numbers you are using for fair value, future revenue, earnings and margins. A Narrative is simply your view of what a company is doing and where it could go, linked directly to a financial forecast and then to a fair value estimate. On Simply Wall St, Narratives are available on the Community page and are designed to be easy to use, so you can quickly compare your view of WisdomTree with those shared by millions of other investors on the platform. Each Narrative turns your assumptions into a Fair Value that you can line up against the current share price to help you decide whether the stock looks attractive or not, and it updates when fresh information such as news or earnings is added. For example, one WisdomTree Narrative might see limited earnings expansion and a lower fair value than today’s price, while another could expect stronger profitability and a higher fair value than the current market level.

Do you think there's more to the story for WisdomTree? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.

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