In This Article:
Broadridge has been treading water for the past six months, recording a small loss of 1.6% while holding steady at $216.22. However, the stock is beating the S&P 500’s 13.7% decline during that period.
Is there still a buying opportunity in BR, or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.
Why Does Broadridge Spark Debate?
Processing over $10 trillion in equity and fixed income trades daily and managing proxy voting for over 800 million equity positions, Broadridge Financial Solutions (NYSE:BR) provides technology-driven solutions that power investing, governance, and communications for banks, broker-dealers, asset managers, and public companies.
Two Things to Like:
1. Long-Term Revenue Growth Shows Strong Momentum
A company’s long-term sales performance is one signal of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years. Thankfully, Broadridge’s 9% annualized revenue growth over the last five years was solid. Its growth surpassed the average business services company and shows its offerings resonate with customers.
2. Outstanding Long-Term EPS Growth
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Broadridge’s EPS grew at a spectacular 12.8% compounded annual growth rate over the last five years, higher than its 9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
One Reason to be Careful:
Previous Growth Initiatives Haven’t Impressed
Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? Enter ROIC, a metric showing how much operating profit a company generates relative to the money it has raised (debt and equity).
Although Broadridge has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 14%, somewhat low compared to the best business services companies that consistently pump out 25%+.
Final Judgment
Broadridge’s positive characteristics outweigh the negatives, and with its recent outperformance in a weaker market environment, the stock trades at 25× forward price-to-earnings (or $216.22 per share). Is now a good time to buy? See for yourself in our full research report, it’s free.
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