Raymond James (RJF) Stock May Trade At A Discount To Fair Value But A Premium To Earnings

Raymond James Financial stock has more than doubled over the past five years, and the current price sits against an intrinsic value estimate that suggests meaningful upside while market based multiples look roughly in line with peers.

• Over the past 5 years, Raymond James Financial has returned 104.8%, which puts extra focus on whether the current price still leaves a margin of safety.
• The recent hire of a $5.4b advisory team may support expectations for future fee based revenue, while the ongoing need to retain and recruit high quality advisors can add cost pressure that affects valuation.
• On Simply Wall St's broader checks, Raymond James Financial screens as undervalued in 5 of 6 areas, which leans toward the shares trading below intrinsic value rather than being fully priced.

The issue now is whether the current share price already reflects this strong run and advisory growth, or if the Excess Returns intrinsic value estimate still points to a clear valuation gap for Raymond James Financial.

Raymond James Financial delivered 8.5% returns over the last year. See how this stacks up to the rest of the Capital Markets industry.

Does Raymond James Financial Look Undervalued on Excess Returns?

The Excess Returns model values Raymond James Financial by comparing the return it earns on shareholder capital to the return investors require. On this basis, the model uses a book value of $66.10 per share and a stable earnings estimate of $14.58 per share, with those earnings grounded in future return on equity estimates from six analysts. The implied average return on equity of 19.20% sits above the model’s required cost of equity of $6.19 per share, which produces an excess return of $8.39 per share.

Rolling these excess returns forward on a stable book value of $75.92 per share gives an intrinsic value estimate of about $264 per share for Raymond James Financial. That is around 33.1% above the current share price, so the stock screens as undervalued on this framework. Because the $5.4b advisor hire reflects ongoing investment in fee-earning capacity, the market may still be discounting the cost and execution risk more than this model does.

Overall, the Excess Returns workup indicates that Raymond James Financial stock appears undervalued at today’s price.

Our Excess Returns analysis suggests Raymond James Financial is undervalued by 33.1%. Track this in your watchlist or portfolio, or discover 52 more high quality undervalued stocks.

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

Does Raymond James Financial Look Fairly Valued on Earnings?

P/E is a useful guide for Raymond James Financial because earnings are a core driver for capital markets businesses. The stock currently trades at about 14.8x earnings, which sits well below the wider capital markets industry average of around 37.8x and also below the peer group average of roughly 23.4x.

The fair P/E ratio for Raymond James Financial is estimated at about 15.2x, which is very close to the current multiple. This suggests the market price lines up reasonably well with what would be expected given the company’s size, risk profile and profitability, even if sector peers command higher averages.

On the P/E multiple, Raymond James Financial appears priced roughly in line with a fair valuation.

See what the numbers say about this price — find out in our valuation breakdown.

The Raymond James Financial Narrative: What Would Justify Today's Price?

Simply Wall St Narratives pick up where the Raymond James Financial valuation work leaves off and make explicit which assumptions on growth, margins and earnings would need to hold for the stock to be worth significantly more or less than today’s price. Each Narrative sets out Raymond James Financial's implied fair value as a thesis about the business that readers can keep tracking over time, and they sit within Simply Wall St's Community page.

Be one of the early voices in the Simply Wall St community to set out a clear, number driven narrative on Raymond James Financial and what the recent addition of the $5.4b Capital Reserve Group team could mean for the business over time. Share your thesis, track how it holds up as new results and recruiting updates emerge, and see how other investors are framing Raymond James Financial's outlook.

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

The Bottom Line

For Raymond James Financial, the Excess Returns intrinsic value estimate points to meaningful upside, while the P/E view suggests the stock now trades close to what the market usually pays for its earnings power. The broader valuation checks still lean toward undervalued, rather than fully priced, but without an extreme gap that forces a conclusion. The key question from here is whether the company can turn advisor recruitment, including the recent multi billion dollar team hire, into durable, fee based earnings that justify both the intrinsic value uplift and any future multiple support.

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.

Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com