Bull Of The Day: StoneX Group

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StoneX Group (SNEX - Free Report)  is a global financial services firm that offers a comprehensive range of brokerage, trading, and advisory services to institutional and retail clients. In addition to several long-term bullish characteristics, StoneX Group boasts a Zacks Rank #1 (Strong Buy) rating, indicating upward trending earnings revisions and boosting near-term stock expectations.

With expertise in commodities, foreign exchange, and global markets, StoneX Group enables clients to navigate complex financial landscapes and manage risk effectively. Through its advanced technology platforms and deep industry insights, SNEX facilitates trading and investment across a diverse array of asset classes, making it a trusted partner for those seeking strategic financial solutions and market access.

StoneX Group has been a stellar stock to own over the last 10 years. During that period, it has compounded at an annual rate of 17.4%, considerably outperforming both the broad market and respective industry. And with growing revenues, a devoted management team, and a reasonable valuation, SNEX is likely to continue to perform well in both the near and long term.

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Earnings Estimates

Although the current quarter earnings estimates have been downgraded over the last 30 days, all other timeframes have seen significant revisions higher. FY23 earnings estimates have been revised higher by 8% over the last two months and are projected to climb 10.9% YoY to $11.10 per share.

Additionally, current quarter sales are expected to grow 18.8% YoY to $693 million and FY23 sales are forecast to increase 44.1% YoY to $2.8 billion.

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During the most recent earnings report, StoneX Group surprised massively to the upside. Earnings came in at $3.35 per share, which was a 37.7% beat and indicated a 38% YoY gain. Additionally, revenue of $777 million beat estimates by 13.2% and showed a 47% YoY increase.

While some of the gains in revenues came from increased financial transactions, the largest portion came from the growth of interest payments collected on the client float. Because interest rates are now significantly higher than they have been in the past, SNEX makes a tidy sum on the cash that sits in client accounts. Interest income grew 329% YoY to $92 million in Q2.

StoneX Group has a strong record of beating earnings estimates, with the average beat being nearly 20%. Based on that, even the recent revisions higher may not meet the strong results the company continues to put up.

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High Insider Ownership

Something that is consistent with the best-performing stocks in the market is a high percentage of insider ownership. When management aligns with outcomes, great things can happen for a company.

Today, insiders own approximately 15.5% of outstanding shares, which is above average, demonstrating that executives at the company believe in the business and are willing to put their own money on the line.
 

Reasonable Valuation

Even with SNEX’s forecasts of high sales growth in the coming years, it still trades at a very fair valuation. The company is trading at one-year forward earnings multiple of 9.5x, which is below the industry average of 13x, and just below its three-year median of 9.9x.

The discounted valuation relative to the industry is particularly compelling. Over the last three years, SNEX stock has returned 65% or 18.2% annualized, while the industry is down -7.4%, or -2.5% annualized.

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Bottom Line

StoneX Group is a top-notch financial services provider with a number of enticing qualities. In addition to its deep insider ownership, strong returns, and a reasonable valuation, SNEX enjoys very nice Return on Equity (ROE) statistics. Over the last five years, ROE has not gone below 12.9% and has been as high as 20.9%.

These strong business economics along with improving earnings make StoneX Group a very exciting investment opportunity today.  


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