I Ran A Stock Scan For Earnings Growth And Raymond James Financial (NYSE:RJF) Passed With Ease - Simply Wall St - Financial Daily News Site

I Ran A Stock Scan For Earnings Growth And Raymond James Financial (NYSE:RJF) Passed With Ease – Simply Wall St

Like a puppy chasing its tail, some new investors often chase ‘the next big thing’, even if that means buying ‘story stocks’ without revenue, let alone profit. And in their study titled Who Falls Prey to the Wolf of Wall Street?’ Leuz et. al. found that it is ‘quite common’ for investors to lose money by buying into ‘pump and dump’ schemes.

In contrast to all that, I prefer to spend time on companies like Raymond James Financial (NYSE:RJF), which has not only revenues, but also profits. Now, I’m not saying that the stock is necessarily undervalued today; but I can’t shake an appreciation for the profitability of the business itself. Conversely, a loss-making company is yet to prove itself with profit, and eventually the sweet milk of external capital may run sour.

See our latest analysis for Raymond James Financial

How Fast Is Raymond James Financial Growing?

If you believe that markets are even vaguely efficient, then over the long term you’d expect a company’s share price to follow its earnings per share (EPS). It’s no surprise, then, that I like to invest in companies with EPS growth. We can see that in the last three years Raymond James Financial grew its EPS by 16% per year. That’s a good rate of growth, if it can be sustained.

One way to double-check a company’s growth is to look at how its revenue, and earnings before interest and tax (EBIT) margins are changing. I note that Raymond James Financial’s revenue from operations was lower than its revenue in the last twelve months, so that could distort my analysis of its margins. Raymond James Financial maintained stable EBIT margins over the last year, all while growing revenue 25% to US$11b. That’s progress.

The chart below shows how the company’s bottom and top lines have progressed over time. To see the actual numbers, click on the chart.

earnings-and-revenue-history
NYSE:RJF Earnings and Revenue History May 27th 2022

Fortunately, we’ve got access to analyst forecasts of Raymond James Financial’s future profits. You can do your own forecasts without looking, or you can take a peek at what the professionals are predicting.

Are Raymond James Financial Insiders Aligned With All Shareholders?

We would not expect to see insiders owning a large percentage of a US$20b company like Raymond James Financial. But we are reassured by the fact they have invested in the company. Notably, they have an enormous stake in the company, worth US$2.0b. I would find that kind of skin in the game quite encouraging, if I owned shares, since it would ensure that the leaders of the company would also experience my success, or failure, with the stock.

Does Raymond James Financial Deserve A Spot On Your Watchlist?

As I already mentioned, Raymond James Financial is a growing business, which is what I like to see. Just as polish makes silverware pop, the high level of insider ownership enhances my enthusiasm for this growth. That combination appeals to me, for one. So yes, I do think the stock is worth keeping an eye on. You should always think about risks though. Case in point, we’ve spotted 1 warning sign for Raymond James Financial you should be aware of.

Of course, you can do well (sometimes) buying stocks that are not growing earnings and do not have insiders buying shares. But as a growth investor I always like to check out companies that do have those features. You can access a free list of them here.

Please note the insider transactions discussed in this article refer to reportable transactions in the relevant jurisdiction.

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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