Over the next 6 years, B. Riley Financial shares will need to reach $30 to achieve average annual stock market performance of 9.0%. To achieve Upper quartile performance, B. Riley Financial’s stock price will need to reach $35 by 2029. At the current price of $18, what are market expectations regarding B. Riley Financial’s future operating performance?
Executive Summary
- B. Riley Financial’s important characteristics: high expected growth, high financial strength, low stability, and very low profitability. A big positive influence on B. Riley Financial’s valuation is its superior Growth.
- High valuation, lagging shareholder returns. Current valuation levels are high relative to the B. Riley Financial Peer Group. Recent market returns have substantially underperformed the B. Riley Financial Peer Group. Total shareholder returns expected to significantly beat the overall equity market. Based on current investor expectations, B. Riley Financial shares should reach a level of $21 by 2029 — an 27.2% per year total shareholder return. A 2029 stock price of $30 would reflect median performance and a price of $35 would be required to reach upper quartile performance.
- Growth has been B. Riley Financial’s biggest valuation strength. Historical growth has been high relative to the B. Riley Financial Peer Group and forecasted growth is relatively high. Asset Growth, and EPS Growth have been superior. Equity Growth has lagged. B. Riley Financial’s historical income statement growth and balance sheet growth have diverged. Revenue growth has fallen short of asset growth; earnings growth has exceeded equity growth resulting in an improving return on equity.
- Asset Turnover is group leading. Return on Equity, Pretax ROA, and Pretax Margin are group lagging. The company has very high excess cash and will have to work to reinvest at attractive returns to support profitability and valuation.
- B. Riley Financial’s risk profile is unfavorable. Overall variability has been very high with very high revenue variability, very high E.P.S. variability, and above average stock price volatility. Financial Strength is relatively high and earnings’ expectations are unavailable. The debt/capital ratio has risen very significantly.
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