Stock Analysis: Franklin Resources ($BEN)
Franklin Resources is a stock I've secretly been stacking behind the scenes for a while now, and with its price dropping below $30 again, I couldn't help but grab some more shares. In this article I'll give a top-down overview of Franklin Resources – ticker symbol $BEN.
What I'll cover:
- What does Franklin Resources do?
- PE Ratio
- Dividend Yield / Payout
- Assets Vs Liabilities
- Revenue Growth over the years
- Profit Growth over the years
- Outstanding Shares
- Free Cash Flow - Can they cover their dividend?
- What does the future hold for $BEN?
- Is $BEN a buy?
What does Franklin Resources do?
Franklin Resources Inc.is an American investment firm that manages investments for retail and high-net-worth individuals around the world. Franklin Resources currently manages about $1.5T.
$BEN's price to earnings ratio is currently 15.23. The average PE for the financial sector is 14.60, which means $BEN doesn't seem to be over or undervalued.
Dividend Yield & Payout:
$BEN has a dividend yield of 3.38% at the time of writing this, and pays a quarterly dividend of $0.28, which has been growing for almost 10 years, signifying strong financial growth and great capital management.
Assets & Liabilities
$BEN currently has ample assets (inventory / cash on hand) that can be liquidated quickly.
Current Assets: $20.22B
Current Liabilities: $10.11B
Should $BEN need to, they could quickly free up cash in order to easily cover their liabilities.
Revenue Growth over past 4-years
Although there was a dip in earnings between 2019/2020, $BEN has slowly been recovering – as with other companies – from the pandemic. $BEN's TTM (trailing-twelve-month revenue) shows that the company is back on an upward trend.
Profit Growth over past 4 years
Similar to revenue growth, profit growth (NET INCOME) took a slight dip, but looks to be on the upward trend looking at the past 12 months thus far. As a company whose primary business is to manage funds, I have no worries that profit after the pandemic will steadily climb back to pre-pandemic levels.
2017 Net income: $1.69B
2018 Net Income: $764M
2019 Net Income: $1.19B
2020 Net Income: $798M
TTM Net Income: $1.09B
When looking at outstanding shares, it's good to see a company using their net income/profits to buy back shares – thus increasing the value of a shareholder's stock.
A "decreasing number" over the years is a good sign.
2017: 559M Shares outstanding
2018: 538M shares outstanding
2019: 504M shares outstanding
2020: 492M shares outstanding
Free Cash Flow - Covering their dividend?
Free cash flow represents the cash available once a company has paid for its fixed assets (buildings, equipment, etc) and other expenses. This money is used to pay out dividends, bonuses, etc.
$BEN's cash flow over the past few years is as follows:
$BEN currently requires around $550,193,000 in free cash flow in order to comfortably sustain their dividend payout. Looking at the figures above, we can see that they earn more than enough to pay their dividends.
What does the future hold for $BEN?
With over $1.5T under management, I don't see Franklin Resources slowing down any time soon. Additionally, as the effects from the pandemic start to wind down over the coming months, I feel as though $BEN will learn from everything they've learned over the past two years – especially since the pandemic hit their balance sheet.
As an investment firm, I think that $BEN will look to tighten its investment strategies and ensure that client money is invested in *pandemic-proof* investments going forward.
What I love about Investment firms is that it's both in their own + their client's interest to preserve and grow capital. Unlike companies in other sectors who may not learn from what the Pandemic has shown us, investment firms need to mitigate financial risk with time.
Is $BEN a buy?
As a shareholder myself, I feel that at its current price (in 2021) at $29.42, $BEN is a great buy at a very fair value. With a history of increasing dividends and solid free cash flow, this is definitely a great company to look into for the long term.
Note: The above analysis is simply for educational purposes and is not meant to solicit encouragement to purchased said stocks. I simply give my opinion based on the current market and the company's financials in order to give my readers condensed information.