Analyst Note| Michael Wong, CFA, CPA |
We are increasing our fair value estimate for no-moat Raymond James Financial to $109 per share from $97. This implies a forward price/earnings ratio of about 13.5 times and a price/book ratio of 2 times. The net $12 increase in our fair value estimate is from multiple adjustments. Approximately $2 of the increase is from earnings since our previous valuation update. Of the remaining net $10 increase in our fair value estimate, $7 is from a higher revenue forecast primarily from the recent increase in client assets, $10 is from increasing our long-run projected operating margin for the company by 1.5 percentage points after reassessing operating margins in light of eventually higher interest rates, and we had a negative $7 adjustment from assuming that the corporate income tax rate will increase.