For Aggressive Investors:
Stifel Financial |  - Co. Spotlights available via RSS feed
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This column is for investors willing to take more risk and potentially receive more reward. The stocks mentioned in this column are not recommended to buy or sell. They're brought to your attention so you can investigate them further to determine if they fit your risk profile. Most of the stocks will have less than $1 billion of market capitalization, have more volatility than other stocks, and oftentimes no earnings. And some will have tremendous stories. | | SF | $50 | Why It's Featured: Why It's Featured: Wall Street firm off Wall Street; growing in tough market.
Danger Zones: Down markets, lower trading activity. | Forward P/E | 18 | | Earn. Growth | 15% | | Projected Sales Growth | 8% | | Market Cap. | $1.37B |
July 31, 2009 - Stifel Financial Corp. (SF-NYSE) through its subsidiaries, engages in retail brokerage; securities trading; investment banking; investment advisory; retail, consumer, and commercial banking; and related financial services in the United States and internationally.
The company operates in four segments: Private Client Group, Equity Capital Markets, Fixed Income Capital Markets, and Stifel Bank. The Private Client Group segment provides securities brokerage services, including the sale of equities, mutual funds, fixed income products, and insurance, as well as offers banking products to their private clients. As of December 31, 2008, it operated a network of 1,142 financial advisors, located in 196 branch offices in 35 states; and 173 independent contractors. The Equity Capital Markets segment offers corporate finance management and participation in underwritings, mergers and acquisitions, institutional sales, trading, research, and market making services. The Fixed Income Capital Markets segment provides public finance, institutional sales, and competitive underwriting and trading. The Stifel Bank segment offers retail and commercial banking services to private and corporate clients, including personal loan programs, such as fixed and variable mortgage loans, home equity lines of credit, personal loans, loans secured by CDs or savings, automobile loans, and securities-based loans. It also provides commercial lending programs, such as small business loans, commercial real estate loans, lines of credit, credit cards, term loans, and inventory and receivables financing. The company's customers include individual investors, corporations, municipalities, and institutions. Stifel Financial Corp. was founded in 1890 and is headquartered in St. Louis, Missouri. What's interesting about this Wall Street firm is that it isn't on Wall Street. It's right in the heart of the Mid West, catering to individuals and institutions, competing head on with the big New York firms. From the looks of the earnings, it's competing very well.
While this year's earnings will be lower ($2.03 vs $2.60), next year looks very good with 6 analysts having a consensus estimate of $2.78, almost a 40% increase. Part of the enthusiasm for next year comes from an increased capital base. On June 11, the company sold 1 million shares of stock at $45. The fact that the company could sell the stock in these capital markets is a good sign in and of itself because the stock was trading very near that level. But more importantly, it gives the firm additional capital to weather any more storms the capital markets may encounter in the near future. If there are no storms, the new capital gives the firm a more competitive position to win new deals, both in equity and fixed income. Stifel is in the final throes of buying 55 regional brokerage offices from UBS, a major Wall Street firm. Analysts see the addition as accretive to earnings immediately. Look for that to close in the third quarter, adding 340 new financial advisors (used to be called stock brokers) with $15 billion in assets and $120 million in revenues. As always, integrating new branches into a system is usually expensive and can take a while. The way things are done at Stifel are certainly different from UBS. If they're too different (and not in a good way), some of the advisors may leave. That's something to watch for. Of course, management is acutely aware of that and will do everything it can to avoid departures. This acquisition broadens Stifel's geographic presence and increases its economies of scale. In fact, one of the positives about Stifel is that its business model is highly scalable. The more branches and advisors it can add, the more profitable it becomes. Furthermore, the company recently announced the hiring of a major Wall Street investment banker, one of several that are leaving the major firms during the current turmoil to join strong regional banks like Stifel. Look for more high profile bankers to join the capital markets group as the company can offer many advantages. More numbers: Price to sales is 1.56. Price to book is 2.15. Operating margin for the last 12 months was 11.77% and Profit margin was 6.23%. Return on Equity was 10.18%. Total cash is 859 million, making $31.38 a share in cash. Total debt is $262.2 million. Current ratio is 1.25. Book Value is $23.19. There are 27.38 million shares outstanding with a float of 24.78. Insiders own 9.12% while insitutions have 78%. Stifel has a good mix of business, serving both institutional and retail sectors. Its Fixed Income group saw an increase of 33% in revenues in the first quarter, compared to the same quarter last year. With several different segments of the capital markets served, the company is well positioned to continue profit growth. When all of those segments are prospering, the earnings will increase dramatically. However, as with all investment banks, when the capital markets take a hit, so do earnings, which can be very volatile. Company Web site: www.stifel.com - Ted Allrich |
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