2 Reasons to Like BR and 1 to Stay Skeptical

Since October 2024, Broadridge has been in a holding pattern, posting a small return of 3% while floating around $227.38. However, the stock is beating the S&P 500’s 9.9% decline during that period.

Is there still a buying opportunity in BR, or does the price properly account for its business quality and fundamentals? Find out in our full research report, it’s free.

Why Does Broadridge Spark Debate?

Processing over $10 trillion in equity and fixed income trades daily and managing proxy voting for over 800 million equity positions, Broadridge Financial Solutions (NYSE:BR) provides technology-driven solutions that power investing, governance, and communications for banks, broker-dealers, asset managers, and public companies.

Two Positive Attributes:

1. Long-Term Revenue Growth Shows Strong Momentum

A company’s long-term sales performance is one signal of its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Over the last five years, Broadridge grew its sales at a solid 9% compounded annual growth rate. Its growth beat the average business services company and shows its offerings resonate with customers.

2. Outstanding Long-Term EPS Growth

We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.

Broadridge’s EPS grew at a spectacular 12.8% compounded annual growth rate over the last five years, higher than its 9% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

One Reason to be Careful:

Previous Growth Initiatives Haven’t Impressed

Growth gives us insight into a company’s long-term potential, but how capital-efficient was that growth? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Broadridge has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 14%, somewhat low compared to the best business services companies that consistently pump out 25%+.

Final Judgment

Broadridge’s positive characteristics outweigh the negatives, and after its recent outperformance in a weaker market environment, the stock trades at 26.3× forward price-to-earnings (or $227.38 per share). Is now a good time to initiate a position? See for yourself in our in-depth research report, it’s free.

Stocks We Like Even More Than Broadridge

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