In this article, let's take a look at Franklin Resources Inc. (BEN, Financial), a $35.11 billion market cap company that is one of the world's largest asset managers, serving retail, institutional and high-net-worth clients.
Revenues
Looking at profitability, revenue grew by 8.6% and led earnings per share increased in the most recent quarter compared to the same quarter a year ago ($1.02 vs $0.80). During the past fiscal year, the company increased its bottom line. It earned $3.79 versus $3.36 in the previous year. This year, Wall Street expects an improvement in earnings ($3.83 versus $3.79).
Margins
The gross profit margin is considered relatively high, at 38.75%. It has increased from the same quarter the previous year. However, the net profit margin of 28.08% is ranked higher than 58% of the 1563 Companies in the Asset Management industry.
Profitability
Finally, let´s compare the best measure of performance for a firm's management: the return on equity. The ROE is useful for comparing the profitability of a company to that of other firms in the same industry.
| Ticker | Company | ROE (%) |
| BEN | Franklin Resources Inc | 21.94 |
| STT | State Street | 10.0 |
| BLK | BlackRock Inc | 12.5 |
| BK | Bank of New York Mellon Corp | 7.59 |
| IVZ | Invesco Ltd | 11.92 |
| Ă‚ | Industry Median | 7.95 |
The company has a current ROE of 21.94% which is higher than the industry median and its peers: State Street (STT, Financial), BlackRock (BLK), Bank of New York Mellon (BNK) and Invesco (IVZ, Financial). In general, analysts consider ROE ratios in the 15-20% range as representing attractive levels for investment. It is very important to understand this metric before investing and it is important to look at the trend in ROE over time.
Relative Valuation
In terms of valuation, the stock sells at a trailing P/E of 14.9x, trading at a discount compared to an average of 21.4x for the industry. To use another metric, its price-to-book ratio of 3.04x indicates a premium versus the industry average of 1.09x while the price-to-sales ratio of 4.15x is below the industry average of 8.88x.
Price Performance
The stock price has risen over the past year. As we can see in the next chart, the stock price has an upward trend in the five-year period. If you had invested $10,000 five years ago, today you could have $17,426, which represents an 11.8% compound annual growth rate (CAGR).
Cash dividends
Dividends have been paid since 1981. The company has a dividend policy showing its commitment to return cash to investors in the form of dividends. The current dividend yield is 0.85%, which can improve in the future allowing higher shareholder´s returns.
Final comment
The company is one of the 10 largest U.S.-based asset managers, with about two-thirds of its total asset under management sourced from domestic clients, and is the fifth-largest manager of cross-border, long-term funds globally.
Moreover, the PE relative valuation and the return on equity that significantly exceeds the industry average make me feel bullish on this stock.
Hedge fund gurus like Jim Simons (Trades, Portfolio), Joel Greenblatt (Trades, Portfolio), Paul Tudor Jones (Trades, Portfolio), Mason Hawkins (Trades, Portfolio), Chris Davis (Trades, Portfolio), Jeremy Grantham (Trades, Portfolio), Murray Stahl (Trades, Portfolio), Chuck Royce (Trades, Portfolio), John Rogers (Trades, Portfolio), David Winters (Trades, Portfolio) and Ken Fisher (Trades, Portfolio) added this stock to their portfolios in the third quarter of 2014, as well as Diamond Hill Capital (Trades, Portfolio).
Disclosure: Omar Venerio holds no position in any stocks mentioned
