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Evercore

Talent Expansion And Service Diversification Will Strengthen Future Prospects

WA
Consensus Narrative from 7 Analysts
Published
August 23 2024
Updated
March 10 2025
Share
WarrenAI's Fair Value
US$326.71
41.8% undervalued intrinsic discount
10 Mar
US$190.28
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1Y
-1.7%
7D
-18.4%

Key Takeaways

  • Evercore's strategic hiring aims at future revenue growth, focusing on expanding client engagement and market share in non-M&A services.
  • Operational efficiency improvements and investment in advisory services are set to enhance profitability and capture more advisory fees.
  • Geopolitical and economic uncertainties and rising competition could disrupt revenue, increase expenses, and challenge market share growth.

Catalysts

About Evercore
    Operates as an independent investment banking firm in the Americas, Europe, Middle East, Africa, and Asia-Pacific.
What are the underlying business or industry changes driving this perspective?
  • Evercore's substantial recruiting of Senior Managing Directors (SMDs) and senior advisors, adding nearly 60 new senior bankers over the past three years, suggests a focus on future capacity expansion and revenue growth as these hires ramp up their client engagement.
  • The company's strategic diversification of its revenue base by expanding into non-M&A services like private capital advisory and private funds group signifies potential growth in revenue via increased client coverage and market share in these sectors.
  • Strong market conditions with improving CEO confidence, healthy sponsor activity, and financing availability are anticipated to gradually enhance the deal-making environment, likely driving future revenue and earnings growth.
  • Ongoing investments in expanding their financial sponsors team and in strategic advisory services, such as liability management and structured capital solutions, position Evercore to capture more advisory fees, thus improving net revenues and potentially net margins.
  • Efforts to improve operational efficiency and reduce compensation and non-compensation expense ratios are poised to enhance operating margins and overall profitability, contributing positively to future earnings growth.

Evercore Earnings and Revenue Growth

Evercore Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Evercore's revenue will grow by 17.0% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 12.7% today to 15.6% in 3 years time.
  • Analysts expect earnings to reach $745.2 million (and earnings per share of $16.67) by about March 2028, up from $378.3 million today. The analysts are largely in agreement about this estimate.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 23.3x on those 2028 earnings, up from 21.4x today. This future PE is greater than the current PE for the US Capital Markets industry at 21.0x.
  • Analysts expect the number of shares outstanding to grow by 1.57% per year for the next 3 years.
  • To value all of this in today's terms, we will use a discount rate of 7.35%, as per the Simply Wall St company report.

Evercore Future Earnings Per Share Growth

Evercore Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?
  • Geopolitical and macroeconomic uncertainties, despite an anticipated improvement in the deal-making environment, could negatively impact revenue and earnings unpredictably.
  • Competitive pressures, particularly in recruiting and retaining top talent, could increase compensation expenses, affecting net margins.
  • Evercore's reliance on large M&A deals and regulatory changes impacting these transactions could disrupt revenue growth projections.
  • Increasing competition in the private capital advisory business may pressure market share and put future revenue at risk.
  • Restructuring activities, a strong revenue contributor, may see fluctuating demand, impacting consistent earnings growth.

Valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of $326.714 for Evercore based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $400.0, and the most bearish reporting a price target of just $295.0.
  • In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $4.8 billion, earnings will come to $745.2 million, and it would be trading on a PE ratio of 23.3x, assuming you use a discount rate of 7.4%.
  • Given the current share price of $206.74, the analyst price target of $326.71 is 36.7% higher.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

Warren A.I. is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by Warren A.I. are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that Warren A.I.'s analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Read more narratives

Analyst Price Target Fair Value
US$326.7
41.8% undervalued intrinsic discount
Future estimation in
PastFuture05b2014201720202023202520262028Revenue US$4.8bEarnings US$745.2m
% p.a.
Decrease
Increase
Current revenue growth rate
15.69%
Capital Markets revenue growth rate
24.03%