Evercore: Increasing Our Fair Value Estimate To $171 From $166; Shares Modestly Undervalued
We are increasing our fair value estimate for narrow-moat Evercore EVR to $171 per share from $166. This corresponds to a forward price/adjusted earnings multiple of around 11.5 times and a forward enterprise value/EBITDA multiple of about 11 times. Of the net $5 increase in our fair value estimate, most of it was from earnings since our previous valuation update with additional adjustments for working capital, managing director productivity, and managing director headcount.
We continue to believe that near-term earnings will likely be pressured by the increase in senior managing director hiring in 2022 and so far in 2023 as the senior managing directors will increase compensation, but won’t add much to revenue in the near term. However, with global interest rates likely peaking and increasing market expectations of a relatively mild economic slowdown in the United States, in contrast to a recession, Evercore’s revenue and earnings should experience a more sustained recovery in the first half of 2024.
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