Is Now The Time To Put Raymond James Financial (NYSE:RJF) On Your Watchlist?

Some have more dollars than sense, they say, so even companies that have no revenue, no profit, and a record of falling short, can easily find investors. But as Peter Lynch said in One Up On Wall Street, ‘Long shots almost never pay off.’

If, on the other hand, you like companies that have revenue, and even earn profits, then you may well be interested in Raymond James Financial (NYSE:RJF). 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.

View our latest analysis for Raymond James Financial

How Quickly Is Raymond James Financial Increasing Earnings Per Share?

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). That means EPS growth is considered a real positive by most successful long-term investors. Impressively, Raymond James Financial has grown EPS by 26% per year, compound, in the last three years. As a general rule, we’d say that if a company can keep up that sort of growth, shareholders will be smiling.

I like to see top-line growth as an indication that growth is sustainable, and I look for a high earnings before interest and taxation (EBIT) margin to point to a competitive moat (though some companies with low margins also have moats). 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. While we note Raymond James Financial’s EBIT margins were flat over the last year, revenue grew by a solid 12% to US$7.4b. That’s progress.

You can take a look at the company’s revenue and earnings growth trend, in the chart below. Click on the chart to see the exact numbers.

NYSE:RJF Income Statement, April 22nd 2019
NYSE:RJF Income Statement, April 22nd 2019

Of course the knack is to find stocks that have their best days in the future, not in the past. You could base your opinion on past performance, of course, but you may also want to check this interactive graph of professional analyst EPS forecasts for Raymond James Financial.

Are Raymond James Financial Insiders Aligned With All Shareholders?

Since Raymond James Financial has a market capitalization of US$13b, we wouldn’t expect insiders to hold a large percentage of shares. But we do take comfort from the fact that they are investors in the company. Notably, they have an enormous stake in the company, worth US$1.4b. This suggests to me that leadership will be very mindful of shareholders’ interests when making decisions!

Is Raymond James Financial Worth Keeping An Eye On?

Given my belief that share price follows earnings per share you can easily imagine how I feel about Raymond James Financial’s strong EPS growth. Further, the high level of insider buying impresses me, and suggest that I’m not the only one who appreciates the EPS growth. Fast growth and confident insiders should be enough to warrant further research. So the answer is that I do think this is a good stock to follow along with. Now, you could try to make up your mind on Raymond James Financial by focusing on just these factors, or you could also consider how its price-to-earnings ratio compares to other companies in its industry.

Although Raymond James Financial certainly looks good to me, I would like it more if insiders were buying up shares. If you like to see insider buying, too, then this free list of growing companies that insiders are buying, could be exactly what you’re looking for.

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

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