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U.S. Financials Sector Analysis

UpdatedSep 25, 2022
DataAggregated Company Financials
Companies1745
  • 7D-5.4%
  • 3M-4.0%
  • 1Y-19.8%
  • YTD-22.1%

Over the last 7 days, the Financials industry has dropped 5.4%, driven by declines in JPMorgan Chase and Bank of America of 6.8% and 7.0%, respectively. However, the industry is down 20% over the past year. Earnings are forecast to grow by 19% annually.

Sector Valuation and Performance

Has the U.S. Financials Sector valuation changed over the past few years?

DateMarket CapRevenueEarningsPEAbsolute PEPS
Sun, 25 Sep 2022US$5.1tUS$2.4tUS$408.5b11.3x12.5x2.1x
Tue, 23 Aug 2022US$5.6tUS$2.4tUS$401.2b11.7x13.9x2.3x
Thu, 21 Jul 2022US$5.4tUS$2.4tUS$496.9b11.3x10.9x2.3x
Sat, 18 Jun 2022US$5.1tUS$2.4tUS$513.5b10.5x9.9x2.1x
Mon, 16 May 2022US$5.6tUS$2.4tUS$515.7b11.6x10.8x2.3x
Wed, 13 Apr 2022US$6.2tUS$2.4tUS$554.4b11.7x11.2x2.5x
Fri, 11 Mar 2022US$6.3tUS$2.5tUS$555.5b10.7x11.3x2.5x
Sun, 06 Feb 2022US$6.8tUS$2.4tUS$548.4b11x12.3x2.8x
Tue, 04 Jan 2022US$6.8tUS$2.4tUS$542.1b11x12.5x2.8x
Thu, 02 Dec 2021US$6.5tUS$2.4tUS$542.5b10.6x12x2.7x
Sat, 30 Oct 2021US$7.0tUS$2.4tUS$557.2b11x12.6x2.9x
Mon, 27 Sep 2021US$6.4tUS$2.3tUS$541.3b11x11.9x2.8x
Wed, 25 Aug 2021US$6.3tUS$2.3tUS$539.0b11x11.7x2.7x
Thu, 01 Jul 2021US$6.1tUS$2.3tUS$536.8b10.9x11.4x2.6x
Sun, 04 Apr 2021US$5.6tUS$2.2tUS$436.2b11.5x12.8x2.6x
Wed, 06 Jan 2021US$4.8tUS$2.0tUS$264.2b11.7x18.1x2.4x
Sat, 10 Oct 2020US$3.8tUS$1.9tUS$241.7b10.2x15.6x2x
Fri, 03 Jul 2020US$3.7tUS$1.9tUS$225.9b10.8x16.3x1.9x
Mon, 06 Apr 2020US$3.3tUS$2.0tUS$276.0b10x11.8x1.7x
Thu, 09 Jan 2020US$4.9tUS$2.0tUS$403.7b13.2x12.1x2.4x
Wed, 02 Oct 2019US$4.5tUS$2.0tUS$333.0b12.8x13.5x2.3x
Price to Earnings Ratio

13.5x


Total Market Cap: US$4.5tTotal Earnings: US$333.0bTotal Revenue: US$2.0tTotal Market Cap vs Earnings and Revenue0%0%0%
U.S. Financials Sector Price to Earnings3Y Average 13.5x202020212022
Current Industry PE
  • Investors are relatively neutral on the American Financials industry at the moment, indicating that they anticipate long term growth rates to remain steady.
  • The industry is trading close to its 3-year average PE ratio of 13.5x.
  • The 3-year average PS ratio of 2.4x is higher than the industry's current PS ratio of 2.1x.
Past Earnings Growth
  • The earnings for companies in the Financials industry have grown 7.0% per year over the last three years.
  • Revenues for these companies have grown 7.1% per year.
  • This means that more sales are being generated by these companies overall, and subsequently their profits are increasing too.

Industry Trends

Which industries have driven the changes within the U.S. Financials sector?

US Market-5.22%
Financials-5.37%
Diversified Financial-2.85%
Insurance-4.20%
Mortgage Finance-5.51%
Banks-5.82%
Capital Markets-6.04%
Consumer Finance-8.16%
Mortgage REITs-8.49%
Industry PE
  • Investors are most optimistic about the Diversified Financial industry which is trading above its 3-year average PE ratio of 13.7x.
    • Analysts are expecting annual earnings growth of 61.3%, which is higher than its past year's earnings decline of 34.6% per year.
  • Investors are most pessimistic about the Consumer Finance industry, which is trading below its 3-year average of 11.8x.
Forecasted Growth
  • Analysts are most optimistic on the Diversified Financial industry, expecting annual earnings growth of 61% over the next 5 years.
  • This is better than its past earnings decline of 35% per year.
  • In contrast, the Consumer Finance industry is expected to see its earnings grow by 2.7% per year over the next few years.

Top Stock Gainers and Losers

Which companies have driven the market over the last 7 days?

CompanyLast Price7D1YValuation
VIRT Virtu FinancialUS$22.713.5%
+US$79.3m
-5.5%PE6.5x
XP XPUS$19.130.7%
+US$72.8m
-56.8%PE15.2x
INTR Inter & CoUS$4.194.0%
+US$64.2m
n/aPB3.3x
TOP TOP Financial GroupUS$11.8515.9%
+US$57.1m
n/aPE119x
IBOC International BancsharesUS$43.451.5%
+US$40.5m
6.4%PB1.3x
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Latest News

Sep 24

Goldman Sachs: A Buy At Tangible Book Value

Summary Goldman Sachs has pulled back roughly 30% off its 52-week highs. In doing so, it has now fallen back to 1.0x price-to-tangible book value. This has historically been a good level at which to buy GS stock. Don't worry too much about swings in earnings; book value has been a much more consistent metric for evaluating Goldman Sachs. Investment banking giant Goldman Sachs (GS) has had an eventful couple of years. The stock doubled not that long ago thanks to sharply improved profits in 2021. Since then, however, the stock has slipped back to near 52-week lows as the near-term profit outlook has dimmed amid a weakening economy: Data by YCharts There's little doubt that Goldman Sachs will face a more challenging operating environment in coming quarters. However, my view is that traders are fretting the near-term swings too much. Instead, I'd urge investors to think about valuing Goldman Sachs based on its book value rather than quarterly earnings. GS Stock: My Favorite Chart My preferred way to look at GS stock is through price-to-tangible book value (P/TBV). This measures a bank's valuation compared to the net asset value of its balance sheet. Bank profitability is driven by its balance sheet and the level of income it can earn on those assets, so book value ends up being a key piece of a bank's long-term value proposition. Here is how GS' ratio has evolved over time: Data by YCharts Prior to the financial crisis, Goldman Sachs used to trade at two and even three times tangible book value. This made sense as Goldman consistently and rapidly increased its tangible book value regardless of short-term economic conditions or earnings. Subsequent to the 2008 financial crisis, however, GS stock plunged to a low 1s P/TBV ratio and has subsequently spent the last decade just plodding along right around 1.0x tangible book plus or minus a small range. I was aggressively buying GS stock back in 2019 when shares were at the 1.0x P/TBV ratio, arguing that was much too cheap for such a high-quality bank with consistently strong profitability and operational metrics. At the time of my purchase, I hoped GS might rally toward 2x P/TBV in a better interest rate environment and with more positive sentiment for the banking sector. This was partially playing out; GS stock got up to a 50% premium to tangible book last year. Now, however, it's right back to 1.0x once again. The investment has not been bad by any means, however. That's because, regardless of what the economy is doing, GS stock continues to grow its tangible book value at a jaw-dropping clip: Data by YCharts In 2019, I was buying the stock around $200 with tangible book at $200. Now the valuation ratio is the same, but the stock price and book value have advanced to $300. Such is the way things go when owning a classic compounding operation such as thing one. Backing up a bit, I'd note that GS' book value continued to rise steadily even in 2008 and 2009 when the rest of the financial sector was melting down. Goldman Sachs has a reputation for being the nation's most shrewd investment bank and there's a good reason why. Rising Book Value, Dividend & Multiple Expansion Even if Goldman Sachs' stock price merely tracked its tangible book value, it'd be a tremendous investment, as its tangible book is up from less than $40/share at the turn of the century to $290 today. But there's more to it than just the steady increase in its balance sheet. For one thing, the company offers a reasonable dividend. Following aggressive hikes in recent years, GS stock now pays out $10/share in annual dividends which works out to a solid 3.2% yield following the sell-off in the stock price. Throw in a starting 3% dividend yield on top of nearly double-digit annualized TBV growth, and things are cooking. Then there's the multiple. As pointed out, in recent years, GS stock has tended to hug the 1.0x P/TBV level. However, it did hit 1.5x in 2021 and consistently was above 2x prior to the financial crisis. A 1.5x T/PBV would put the stock at nearly $450 today, and a 2x multiple would lift it to $579. I'm not the only one thinking GS stock is worth more than $400 per share. Morningstar's Michael Wong just raised his price target for GS stock up to $438 per share in July of this year. Wong shares my thinking, writing: "We think the firm should trade at 1.5 to 1.6 times tangible book value." Wong attributes this higher valuation multiple to the bank's larger and more profitable investment management operation, a growing revenue stream from the consumer business, and improved expense control among other factors. Goldman Sachs' Profitability The issue with measuring the too-big-to-fail banks on short-term earnings is that there are a ton of moving parts that make up the calculations. You have things like loan loss reserves, mark-to-market accounting, and so on which can greatly influence profitability over a three month over even yearlong period. Goldman Sachs currently looks exceptionally profitable on a trailing basis, and a lot of people have made bull theses for the stock based on its single-digit P/E ratio. They aren't wrong, exactly, but the thinking is incomplete. To zoom out, let's consider Goldman's return on equity "ROE" over the past decade: Data by YCharts ROE is a bank's profitability on its book value assets -- essentially how much profit it can wring out of every dollar of equity it is putting to work. Over time, a bank's returns are driven by how much capital it is using and how profitable it can deploy said capital. As we've seen above, Goldman Sachs has grown its book value incredibly quickly. Now let's look at the return on equity side. Over the past decade, ROE has been very stable, almost always being in the 8-12% range. This is pretty good for a large U.S. bank in a low interest rate environment. An 8% ROE would be considered fairly average, and a 12% reading is quite good though not best in class by any means. Since 2020, however, Goldman's ROE blasted off to stratospheric levels. This explains the massive earnings and very low P/E ratio. Goldman was suddenly able to get as much as twice as much return out of every dollar it was putting to work.

Sep 22

Berkshire Hathaway Performing Well In This Down Market

Summary Berkshire Hathaway is performing well in this down market and outperforming the S&P 500 by 10% this year. Berkshire is trading at a similar Price/Earnings ratio as the S&P 500 without any consideration of "look through" earnings from the equity portfolio. At $270 and a 1.25x price/book value, Berkshire stock is at valuation levels where they aggressively repurchased shares in the past. In my early 2022 writing on Berkshire Hathaway (BRK.A) (BRK.B) I predicted an outperformance of 15% versus the market, as measured by the S&P 500. My prediction is on track, but wow, what a path to get there! Data by YCharts After peaking at $362/share earlier this year, Berkshire has declined with the rest of the market, yet it is still outperforming the S&P 500 by over 10%. As 2022 continues on, I believe Berkshire is well-positioned to continue outperforming. Berkshire's Operating Businesses - Are They Inflation-Resistant? Berkshire posted excellent operating earnings in the second quarter, which got little fanfare, likely because of the depressed broader market and the $53 billion in mark-to-market losses in the equity portfolio. Berkshire Q2 Earnings Release Even if we back out "Other" which included around a billion in foreign currency gains, this quarter showed a clear, broad based improvement over 2021 despite what most would consider to be a more difficult operating environment. Going forward, I believe Operating Earnings will continue to be strong because Berkshire's businesses tend to be inflation-resistant. For those that have read Buffett extensively, it's one of the key things he looks for in a business. Perhaps his most repeated quote on the subject is the following: The single-most important decision in evaluating a business is pricing power. If you've got the power to raise prices without losing business to a competitor, you've got a very good business. And if you have to have a prayer session before raising the price by a tenth of a cent, then you've got a terrible business. I've been in both, and I know the difference. While there is no quantitative way (at least that I know of) to prove this, I believe the collection of Berkshire's businesses will prove to be more inflation-resistant than the average S&P 500 company. Berkshire Hathaway's Recent Price Action And Current Book Value Shareholder's equity as of the Q2-2022 10-Q was $461 billion, compared to a current market capitalization of $598 billion. That puts Price/Book at 1.3x using last quarter's numbers. But last June ended near the lows for many of Berkshire's holdings, particularly Apple and the banks. Most are up since then. Author Berkshire's top 5 holdings are up $22 billion ($17.4 billion when adjusting for deferred taxes) since June 30th. Add another $8 billion in operating earnings, and we're closer to a 1.25x multiple. Berkshire has been cheaper at points over the last few years, including much of 2020, but this is towards the lower end of its recent valuation range. Berkshire earned $16.3 billion in the first half of this year. I think a repeat performance is likely in the back half, driven by increased investment income and seasonal strength in the energy business. Let's round down and assume $32 billion in earnings for the year. For the full year, that puts Berkshire at a ~18.7x Price/Earnings ratio, even ignoring the "look through" earnings of Berkshire's substantial equity holdings! Compare this to Morgan Stanley's (MS) latest earnings estimates for the S&P 500, which they just decreased. (I think there is further downside to these numbers, but let's go with them.) 2022: $220 (from $225 prior) 2023: $212 (from $236 prior) 2024: $226 (from $237 prior) At 3800 on the S&P 500, this implies a forward multiple around ~17.3x for the index, with almost no growth slated for the next 3 years. There has been much ink spilled over the many different methodologies on how to properly value Berkshire, but most all of them give some value to the equity book beyond the dividends that show up in Operating Earnings. But Berkshire, with its huge cash buffer, is barely more expensive than the index just based on operating earnings. Even with conservative treatment of the equity investments, Berkshire seems significantly "cheaper" than the S&P 500. Cash Is No Longer Trash; Cash Is King. Berkshire was very active purchasing equities earlier this year, purchasing $40 Billion in three weeks in Q1 by initiating a large stake in Occidental (OXY), Citigroup (C), and HP, Inc. (HPQ) while adding to stakes in Activision Blizzard (ATVI) and Chevron (CVX). As a result, Cash and U.S. Treasury bills dropped from $143.9B at year-end to $105.4B on June 30th (still a substantial amount.) Data by YCharts An abundance of cash on the balance sheet earning almost zero has been a drag on Berkshire's results for the past several years when the Fed was cutting rates to zero. This headwind has now turned into a tailwind, as lower yielding debt matures and Berkshire can roll into 1-year paper yielding 4%. Some may argue that Berkshire is still "losing" to inflation this way. Personally, I'd rather them "lose" to inflation earning a 4% nominal yield and wait for bargains to appear than get pushed into risk assets because cash is yielding nothing. Beyond that, Berkshire has $119 billion in "Notes Payable and other borrowings" most of which is at fixed rates. In aggregate, higher interest rates are a win for them. Berkshire Repurchases Buffett and company have stayed true to their word on repurchases, only doing so when they believe shares are trading at a significant discount to intrinsic value. They bought back significantly when the shares were in the $270-280 range, slowed their purchases above $300, and stopped entirely in April/May when the price spiked.

Sep 20

Wells Fargo has 'much more work to do' in risk controls, CEO Scharf to say

While Wells Fargo (NYSE:WFC) has made progress in its mission to improve its risk controls, "we know we still have much more work to do," work that will take "several years" to accomplish, Wells Fargo CEO and President Charlie Scharf will tell the House of Representatives Committee on Financial Services on Thursday, according to his prepared testimony. "We have outstanding litigation, regulatory matters, and customer remediations to resolve, and until our broad book of risk, control and regulatory work is complete, we remain at risk for setbacks," Scharf will say. Recall that Scharf took over as CEO of Wells Fargo (WFC) in October 2019, to transform the bank after a string of scandals including employees creating millions of bogus accounts to meet their sales goals. He will emphasize that the "enhancement and implementation of an appropriate risk and control" across Wells Fargo (WFC) is the company's "number one priority," and "we are moving forward to fulfill our obligations." The board and the company's operating committee have been transformed since 2019, with 77% of board member new since then and 11 of 16 operating committee members new since Scharf started at WFC, he will point out. A number of milestones it has already reached include: The January 2021 termination of a 2015 consent order by the Office of the Comptroller of the Currency related to the bank's Bank Secrecy Act/Anti-Money Laundering compliance program; September 2021 expiration of a Consumer Financial Protection Bureau consent order issued in 2016 regarding WFC's retail sales practices; OCC's December 2021 termination of a consent order issued in June 2015 regarding add-on products that the bank sold to retail banking customers before 2015; and January 2020 expiration of a CFPB consent order issued in January 2015 regarding claims that the bank violated the Real Estate Settlement Procedures Act. He will acknowledge that Wells Fargo (WFC) has been too slow in addressing some legacy issues. For example, in September 2021 the OCC assessed a $250M fine and imposed a new consent order related to loss mitigation activities in its Home Lending Business and insufficient progress under a consent order the agency issued in 2018.

Sep 14

Why Morgan Stanley Looks Enticing On The Drop

Summary Morgan Stanley is shifting from the volatile investment banking business towards the more stable wealth management side. It's set to benefit from the high number of acquired customers from E-Trade. Recent downturn in the stock price makes it attractive. Capital asset-light companies are a great asset class for investors who prize high profitability, shareholder returns, and a hedge against inflation. It's important, however, to stick with moat-worthy names with a strong brand reputation. This brings me to Morgan Stanley (NYSE:MS) which has emerged as a much stronger enterprise in recent years. This article highlights why MS looks enticing, especially after recent price and market volatility, so let's get started. Why MS? Morgan Stanley is a leading global financial services firm that's a strong player in investment banking, securities, and wealth management services. Its roots can be traced back to 1924 and today, has around a staggering $5 trillion in client assets. Morgan Stanley's deep-rooted client relationships and efficient scale has enabled it to achieve industry leading returns. This is reflected by its A+ profitability grade with a strong 13.6% return on equity. Moreover, MS has shifted towards a more stable business model in recent years, by moving towards wealth management and away from its more volatile investment banking line of business. That's because investment banking by nature is more capital-intensive compared to the steady and fee-based nature of the wealth and asset management business, in which returns on equity can range from the high teens to the 20s percent. These segments were further boosted by Morgan Stanley's acquisitions of discount brokerage E-Trade and asset manager Eaton Vance last year. This is not to say, however, that MS doesn't come with headwinds. As with any financial services companies, market volatility in the pricing of securities can result in a drag in AUM-related earnings. This was reflected by significant movement in the investments related to deferred cash based compensation plans (most likely restricted stock units), which resulted in a significant drag on top-line revenues across the firm, particularly in wealth management during the second quarter. Moreover, legal costs amounting to $200 million related to employees' use of personal devices and the firm's recordkeeping requirements also contributed to the EPS decline to $1.39 from $1.85 in the prior year period. Looking forward, the market rebound since the beginning of July, despite recent volatility, could yield better earnings results for Morgan Stanley. Growth can also come in the form of net new assets under management, with management expecting $1 trillion in net new assets every 3 years. Moreover, the acquisition of E-Trade has added incremental new customers which the firm can convert from self-advised to full-service, as reflected by management during this week's Barclays (BCS) Global Financial Services Conference: Now we have relationships with 16.5 million clients and that number is growing very quickly. And when people ask me, what are some of the metrics that I look at on a regular basis to manage the business? The number of relationships that we have and the growth of those numbers of relationships that we have that go into that funnel that is something that I look at on a regular basis because each of those relationships represents real opportunity. And obviously right now a lot of those relationships are digital because they came in the workplace they came in the self-directed channel. So the way we think about it is that it's our job through technology, through deepening relationships with clients by every interaction with our client we learn more about the client. We can think about them as an individual. We want to understand we want to know each client we have as an individual through every touch point we have with them regardless of what channel regardless of how we interact with them and we want to build those trust-based relationships and deepen those relationships with those clients.

XP

US$19.13

XP

7D

0.7%

1Y

-56.8%
Aug 16

XP: Attractive Valuation And Strong Growth Potential

XP’s total gross revenue grew 13% when comparing the results of 2Q22 with 2Q21. XP has a 1 Year Price Performance of -58.97% while the Sector Median is -4.04%. In my opinion, XP Inc. currently has an attractive valuation and continues to show strong growth potential. Therefore, I continue to rate XP as a buy. However, due to the relatively high risk factors such as currency risk, I recommend only investing a very limited amount of your total investment portfolio in XP. Investment Thesis XP Inc. (XP) is the largest independent broker in Brazil, providing a comprehensive financial service platform. Since writing about XP back in April, the company's stock has decreased by 27.81%. I continue to rate XP as a buy: the company has managed to create its own ecosystem and has established a strong brand image within the Brazilian Investment Banking and Brokerage Industry. Although XP has shown relatively low growth rates in 2Q22 as compared to 2Q21, I remain optimistic in regards to its future growth prospects. Furthermore, I consider the current valuation of the company to be attractive. However, due to relatively high risk factors, for example in regards to currency risk, I would limit my XP position to a maximum of 1.5% of a total investment portfolio. The HQC Scorecard demonstrates that XP is only moderately attractive in terms of risk and reward: XP receives an overall rating of 49/100. In terms of Growth (100/100), the company is rated as very attractive. It achieves an attractive rating in the categories of Valuation (68/100) and Expected Return (60/100). For Economic Moat (43/100) and Profitability (50/100), XP is rated as moderately attractive. When it comes to Financial Strength (35/100), the company receives an unattractive rating. Industry Overview In a previous article about XP, I gave an industry overview of the Brazilian banking sector and mentioned that the following five largest banks divide the market share among themselves: Itaú Unibanco (ITUB), Bradesco (BBD), Banco do Brasil (BDORY), Caixa Econômica Federal, and Banco Santander Brasil (BSBR). Furthermore, I explained that: "According to Reuters, these banks hold 82% of all assets in Brazil. Comparatively, the five largest banks in the U.S. hold just 43% of all assets in the country. These percentages show the extreme concentration of the Brazilian banking sector. Through its expansion strategy, XP is directly expanding into the business of traditional banks." XP's Competitive Advantages In my previous analysis on the company, I also explained in more detail that XP's creation of its own ecosystem and the strong brand image it has managed to establish in Brazil contribute to the company's competitive advantages over its opponents: "XP seeks to integrate further individual clients, institutional clients, corporations, and independent brokerage firms on its investment platform. In this way, the company creates a network effect, which will help them to increase their revenue. XP has managed to build a strong brand in Brazil. According to Interbrand, XP is currently the 11th most valuable brand in Brazil." XP 2Q22 Results XP's total gross revenue grew by 13% when comparing the results of 2Q22 (R$3.6 billion in revenue) with 2Q21 (R$3.2 billion in revenue). This growth was primarily driven by its Retail business, while showing a growing contribution from Fixed Income products and Float revenues. However, the adjusted EBITDA decreased by 2% YoY, which was mainly driven by higher selling, general and administrative (SG&A) expenses due to investments in new verticals as well as internal advisors. Andre Martins, XP's Head of Investor Relations, said the following in response to the company's 2Q22 results: "We know we are in a tough macro environment with the bear markets, and that has an impact on the investment business, especially, but despite this tough macro environment, we were able to deliver our all-time high record quarterly revenues," XP has a 1 Year Price Performance of -58.97% while the Sector Median is -4.04%. XP's 2Q22 results strengthen my belief that you should only invest a very limited amount of your total investment portfolio if investing in the company. Overview: XP XP Sector Financials Industry Investment Banking and Brokerage Market Cap $11.03B Revenue [TTM] $2.44B Revenue 3 Years Growth Rate [CAGR] 60.54% Revenue 5 Years Growth Rate [CAGR] 57.00% EPS Diluted 5 Years Average Growth Rate [FWD] 35.69% Gross Profit Margin 71.94% Return on Equity 25.57% P/E GAAP [FWD] 15.41 EPS [FWD] 1.23 Dividend Yield [FWD] 0% Source: Seeking Alpha XP's Valuation Discounted Cash Flow [DCF]-Model In terms of valuation, I have used the DCF Model to determine the intrinsic value of XP. The method calculates an intrinsic value of $22.72 for the company. The current stock price is $19.69, which results in an upside of 15.40%. XP's Average Revenue Growth [FWD] Rate over the last 5 Years is 39.19%. I've made more conservative assumptions for the company with my DCF Model by assuming a Revenue Growth Rate of 20% and EBIT Growth Rate of 25% over the next 5 years. Furthermore, I assume a Perpetual Growth Rate of 4%. I have used its current discount rate [WACC] of 5.99% and Tax Rate of 18%. Furthermore, an EV/EBITDA Multiple of 11x was used, which is the company's latest twelve months EV/EBITDA. Based on the above, I calculated the following results: Market Value vs. Intrinsic Value: Market Value $19.69 Upside 15.40% Intrinsic Value $22.72 Source: The Author Relative Valuation Models XP's P/E [FWD] Ratio XP's P/E Ratio is 15.41, which is 39.38% above the sector medium (11.05), which provides us with an indicator that the company is currently overvalued. Hypothetical Dividend Projections XP currently doesn't pay a dividend. In the table below you can see what the company's annual dividend and dividend yield would be if it was to pay one. The annual dividend and dividend yield are based on XP's next fiscal year EPS estimate multiplied by hypothetical payout ratios: EPS [FWD] Payout Ratio Annual Dividend Dividend Yield 1.23 10% 0.12 0.62% 1.23 20% 0.25 1.25% 1.23 30% 0.37 1.87% 1.23 40% 0.49 2.50% 1.23 50% 0.61 3.12% Source: Seeking Alpha XP According to the Seeking Alpha Factor Grades According to the Seeking Alpha Factor Grades, XP is rated with a D- in terms of Valuation and a B+ in regards to Growth. For Profitability, the company gets a D- rating. For Momentum, it gets an F and for Revisions a C-. Source: Seeking Alpha XP According to the Seeking Alpha Quant Ranking The Seeking Alpha Quant Ranking puts XP in 24th position (out of 25) within the Investment Banking and Brokerage Industry, and 639th (out of 651) within the Financials Sector. Source: Seeking Alpha