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Why State Street Has Lower Valuations

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Nov. 20 2020, Updated 3:52 p.m. ET

Discounted valuations

The price-to-earnings ratio of State Street Corporation (STT) is ~12.6x on an NTM (next-12-months) basis. This ratio implies discounted valuations, as the average of its competitors is ~15.0x.

Among the company’s competitors, BlackRock (BLK), Northern Trust Corporation (NTRS), and Franklin Resources (BEN) have price-to-earnings ratios on an NTM basis of ~18.3x, ~16.4x, and ~10.4x, respectively.

A marginal decline in State Street’s earnings per share (or EPS) for 1Q18 compared to 4Q17 might be a reason for its lower valuations. In addition, the company’s total assets under management (or AUM) are expected to be negatively impacted by the weaker performance in the equity markets, impacting its 1Q18 results.

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Price target

The volatility in the markets could improve State Street’s trading services revenues, which could positively impact its 1Q18 results. Moving forward into 2018, the company is expected to benefit from the interest rate hikes by the Federal Reserve, which could improve its net interest income. So, State Street could recover from its discounted valuations.

Wall Street analysts have given a one-year price target on State Street of $117.53. This implies a rise of ~16.9% from the current trading price of $100.57.

State Street’s price-to-earnings ratio is ~17.0x on an LTM (last-12-months) basis. BlackRock (BLK), Northern Trust Corporation (NTRS), and Franklin Resources (BEN) have price-to-earnings ratios of ~23.3x, ~22.3x, and 10.6x, respectively, on an LTM basis.

Check out all the data we have added to our quote pages. Now you can get a valuation snapshot, earnings and revenue estimates, and historical data as well as dividend info. Take a look here!

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