TFS Financial (TFSL): Assessing Valuation After Record Earnings and a Surprise Dividend Waiver

Record earnings and dividend shift put TFS Financial (TFSL) in focus

TFS Financial (TFSL) just wrapped up a record fiscal year, with stronger net interest margins and brisk mortgage and home equity growth. At the same time, its mutual holding company chose to waive dividends, reshaping how investors think about total return here.

See our latest analysis for TFS Financial.

The record fiscal year and dividend waiver come against a backdrop of steady gains, with the share price up around 11 percent year to date and a 1 year total shareholder return of roughly 13 percent. This suggests momentum is quietly building rather than fading.

If these moves have you rethinking your income and growth mix, it is also worth exploring how other banks and financials stack up against this performance on valuation and risk.

For a broader view of where capital is flowing, now could be a smart moment to discover fast growing stocks with high insider ownership.

With shares trading near analyst targets after a standout year, some will argue TFSL’s momentum and cleaner balance sheet are already fully reflected in the price. This raises the question: is this still a buying opportunity, or is future growth already priced in?

Price-to-Earnings of 42.8x: Is it justified?

At a last close of $13.74, TFS Financial trades on a rich price-to-earnings multiple of 42.8 times, implying a premium valuation versus peers and its own earnings power.

The price-to-earnings ratio compares the company’s share price with its per share earnings. It serves as a direct gauge of how much investors are willing to pay for each dollar of profit. For a mature retail bank like TFS Financial, this metric is especially important because earnings growth is typically steadier and slower than in high growth sectors. As a result, extreme valuations stand out more clearly.

In this case, the 42.8 times earnings multiple is well above the estimated fair price-to-earnings ratio of 11.6 times. This is a level the market could potentially gravitate toward if expectations cool. The current multiple also sits materially higher than both the US Banks industry average of 11.9 times and a peer average of 15 times, which signals that the market is pricing in a far stronger earnings trajectory and resilience than either sector norms or fair ratio analysis suggest.

Explore the SWS fair ratio for TFS Financial

Result: Price-to-Earnings of 42.8x (OVERVALUED)

However, risks remain, including potential margin pressure if funding costs rise faster than loan yields and softer housing demand weighing on mortgage growth.

Find out about the key risks to this TFS Financial narrative.

Another View: DCF Paints an Even Starker Picture

Our DCF model is even harsher than the earnings multiple. With shares at $13.74 versus a fair value estimate of about $1.40, TFS Financial screens as deeply overvalued. If both methods flash red at once, how comfortable can investors be riding this story further?

Look into how the SWS DCF model arrives at its fair value.

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out TFS Financial for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 908 undervalued stocks based on their cash flows. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Build Your Own TFS Financial Narrative

If you see things differently or simply want to dig into the numbers yourself, you can build a personalized view in minutes: Do it your way.

A great starting point for your TFS Financial research is our analysis highlighting 2 key rewards and 2 important warning signs that could impact your investment decision.

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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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