Evercore Inc. (NYSE: EVR) appeals to us as another top investment bank that can deliver good shareholder returns regardless of economic conditions. We believe management’s commitment to shareholder value, strong historical financial results, and world-class investment banking reputation are key factors that make this stock a great investment. While the stock has been under pressure from the economic slowdown and tight monetary policy, we are confident that Evercore will once again become the darling of the market once these adverse conditions are over.
Strong brands, strong results
Evercore is a boutique investment bank specializing in investment banking activities such as M&A advisory, capital markets advisory and restructuring. Aside from banks with increased bandwidth such as Goldman Sachs & Company and JPMorgan that have non-investment banking related businesses (i.e. sales and trading, commercial banks, etc.), Evercore is one of the leading investment banks by fee volume. Additionally, as seen below, Evercore has generated most of its revenue from the US markets year over year, making it a pure game for investors who only want to invest in the US advisory market.
Evercore has delivered outstanding financial results for investors over the years. Over the past 5 years, Evercore has nearly doubled its revenue and increased its revenue by an impressive 15% CAGR. Even more impressive is that Evercore has had more and more during this time 3 times Its EPS, which is around 26% CAGR. This excellent financial performance has been fairly consistent and has endured over the last 5 years despite volatile market conditions.
Although investment banking revenue fell 38% in the first half of this year compared to the first half last year, Evercore actually reported an increase in revenue over the same period. As seen below, despite adverse economic conditions, Evercore reported a slight increase in GAAP and adjusted earnings in 2022 compared to 2021 in its “Year to Date” results. This striking contrast between market conditions and Evercore’s robust financial performance supports the belief that Evercore will be able to thrive in any environment, as it has done over the years.
Evercore management has consistently adhered to shareholder value and has historically implemented generous buyback programs and consistently paid dividends to shareholders. Earlier this year, Evercore launched a $1.4 billion share buyback program, about 33% of its current market cap. Evercore’s massive buyback program demonstrates management’s confidence in the company and its business prospects, as well as its commitment to increasing shareholder value by returning such a large amount of capital to its shareholders. Alongside its buyback program, Evercore has been a consistent dividend-paying company, paying $0.72 per share recently this quarter, which translates to a 2.83% annualized dividend yield. That yield is significantly higher than the current yield of the S&P 500, and Evercore has a consistent track record of paying dividends. Compared to a quarterly payout of $0.34 per share in 2017, Evercore has increased its dividend by more than 100% and increased its dividend by ~16% CAGR, significantly outperforming the S&P 500 over the period. has gone.
We believe the trend suggests the stock price is moving up from here. Using historical data, Evercore stock’s P/E rating is at an all-time low, trading at around 6.0 times earnings. Even going back to P/E multiples of around 12.0x to 15.0x based on TTM returns, we see the stock price up 100% to 150% from its current levels. And also, due to the massive buyback program, we’re seeing the FCF per share go up fast and it’s now at 25 FCF per share. This means that based on current levels, around a quarter of the stock’s value is covered by the FCF. This is quite attractive for value investors and should provide some support to the share price. We believe that as the buyback program continues, shareholders will see their holdings appreciate in value.
EVR PE Ratio data from YCharts
Evercore is a premier boutique investment bank that is attracting the attention of investors looking for consistent dividend income and growth potential for shareholder value. Evercore has a track record of success and there are no signs that this winning streak will end any time soon. With double digit sales and earnings CAGR over the past 5 years and the launch of a massive buyback program, we believe the current price level is the perfect entry point for investors to hoard shares of this seedy stock.