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Stifel Financial Update: Decreasing Our Fair Value Estimate To $72

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We are decreasing our fair value estimate for Stifel Financial SF to $72 per share from $81. Our fair value estimate implies an adjusted forward price/earnings multiple of about 12 times and a price/book ratio of 1.6 times. Of the net $9 decrease in our fair value estimate, most of it was due to forecasting lower institutional group revenue along with a related reduction in our normalized operating margin for the company. We currently assess the shares to be about fairly valued.

We continue to believe that wealth management revenue should remain fairly strong for the company for the foreseeable future. However, during 2020 up through part of 2022 Stifel had abnormally high institutional revenue from a strong a capital markets environment and a robust trading one. While the market has recently become more positive on the U.S. economy and institutional group revenue should be returning to growth the next several quarters, it could take still take years for Stifel’s institutional group to report earnings close to what it reported during the 2020 to early 2022 period.

The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.

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Michael Wong

Director of Equity Research
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Michael Wong, CFA, CPA, is director of equity research, financial services, North America, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc.

Michael previously served as chair of the valuation committee. Before assuming his current role in 2017, he was a senior equity analyst, covering investment banks and brokerages. Before joining Morningstar in 2008, he worked in corporate and public accounting.

Wong holds a bachelor’s degree in business administration, with concentrations in accounting, corporate finance, and financial services from San Francisco State University, where he graduated summa cum laude. He also holds the Chartered Financial Analyst® designation and is a Certified Public Accountant. Wong has also passed the Certified Financial Manager (CFM) and Certified Management Accountant (CMA) exams.

Wong won the “Technology Thought Leadership” award at the 2016 WealthManagement.com Industry Awards for his report, The Financial Services Observer: The U.S. Department of Labor’s Fiduciary Rule for Advisors Could Reshape the Financial Sector. In 2011, he ranked second in the Investment Services industry in The Wall Street Journal’s annual “Best on the Street” analysts survey. Wong was awarded the summer 2005 Johnson & Johnson Institute of Management Accountants CFM Gold Medal.

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