Evercore: Top Boutique Investment Stock Bank at a Discount

thesis

Evercore Inc. (NYSE: EVR) is attractive to us as another top investment bank that can provide good returns to shareholders regardless of economic conditions. We believe in management’s commitment to shareholder value, strong historical financial results and superior investment banking reputation are all key factors that make this stock a great investment. Although the stock is under pressure from the economic slowdown and monetary tightening, once these headwinds dissipate, we believe Evercore will once again become a market darling.

Strong brand, strong results

Evercore is a boutique investment bank specializing in investment banking activities such as M&A advisory, capital markets advisory and restructuring. Outside of big banks like Goldman Sachs & Co and JP Morgan, which have significant non-investment banking businesses (eg Sales & Trading, Merchant Banking, etc.), Evercore is one of the top investment banks by volume of fees. Additionally, as seen below, on a year-to-date basis, Evercore generated the majority of its revenue from the US markets, making it a pure play for investors who may only want exposure to the advisory services market. USA.

Evercore has delivered outstanding financial results to investors over the past few years. In the last 5 years, Evercore has almost doubled its revenue and grown its revenue at an impressive CAGR of 15%. What is most impressive is that during this time, Evercore has more than tripled Its EPS, which represents a CAGR of approximately 26%. This stellar financial performance has been quite consistent, withstanding volatile market conditions over the past 5 years.

Although investment banking revenue was down 38% in the first half of this year compared to the first half of last year, Evercore actually reported a year-over-year increase in revenue over the same time frame. As seen below, despite worse economic conditions in 2022 than in 2021, Evercore reported a slight increase in GAAP and adjusted earnings in its “Year to Date” results. This stark contrast between market conditions and Evercore’s resilient financial performance further supports the point that Evercore will be able to thrive in any environment, as it has over the past few years.

Shareholder friendly policies

Evercore’s management has been friendly to shareholder value and has historically implemented generous return programs and consistently paid dividends to shareholders. Earlier this year, Evercore initiated a $1.4 billion share buyback program, which is nearly ~33% of its current market capitalization. Evercore’s large buyback program demonstrates management’s confidence in the company and its business prospects, while at the same time demonstrating a commitment to increasing shareholder value by returning such a large amount of capital to its shareholders. Aside from the buyback program, Evercore has been a consistent dividend-paying company and most recently paid $0.72 per share this quarter, which equates to an annualized dividend yield of 2.83%. That yield is easily higher than the current S&P 500 yield, and Evercore has a history of consistency when it comes to dividend payments. Compared to the quarterly payout of $0.34 per share in 2017, Evercore has increased its dividend by more than 100%, and has grown its dividend at a CAGR of ~16%, which far outpaces the S&P 500 over this time period. .

Free estimate

We believe the trends indicate that the share price will rise from here. Using historical data, Evercore’s stock P/E valuation is at historic lows and trades at around 6.0x earnings. Even going back to roughly 12.0x to 15.0x P/E multiples based on TTM earnings, we see that the stock price could rise 100% to 150% from its current levels. and In addition, due to the massive buyback program, we see that FCF per share has increased rapidly and now stands at $25 FCF per share. This means that based on current levels, roughly a quarter of the stock’s value is supported by FCF. That’s quite attractive to value-focused investors, and that should provide some support for the share price. We believe that as the buyback program continues, shareholders will see the value of their holdings increase.

Conclusion

Evercore is a boutique investment bank that deserves the attention of investors looking for stable dividend income and looking for the potential to increase shareholder value. Evercore has had a history of success and there are no indications that the streak will end anytime soon. With double-digit CAGR in revenue and earnings over the past 5 years, as well as the initiation of a large buyback program, we believe current price levels are the perfect entry points for investors to pick up shares of this breakout stock.