Why Franklin (BEN) Stock Should Be Added To Your Portfolio

With prudent cost management and strong diversification strategies, Franklin Resources, Inc. (NYSE:BEN) appears a solid bet now. The company’s relatively strong distribution platform and consistent strategic acquisitions are anticipated to yield positive results for the stock.

Though expenses might escalate for Franklin due to the strictly regulated nature of investment management business and potential investments in the technology, sharper focus on organic growth is expected to make the growth path smoother for the company.

With the Q1 earnings season almost at its end, the Finance sector seems to be one of the best performers. So, we thought of bringing up a stock from the sector that reflects strong fundamentals and solid long-term growth opportunity.

Particularly, Franklin is one such stock that not only beat estimates this time, but has also been witnessing upward estimate revisions, reflecting analysts’ optimism about its future prospects. Over the last 30 days, the Zacks Consensus Estimate for 2017 and 2018 increased 3.6% and 2.2%, respectively.

Further, shares of this Zacks Rank #1 (Strong Buy) stock have gained 11.8% in the last six months, outperforming 8.3% growth recorded by the Zacks categorized Investment Management industry.

Notably, Franklin has a number of other aspects that make it an attractive investment option.

5 Reasons Why Franklin is a Golden Egg

Prudent Expense Management: Franklin recorded 7% and 14% decline in operating expenses in fiscal 2015 and 2016, respectively, with the trend continuing in first-half 2017 as well. In addition, management expects expenses in fiscal 2017 to remain flat or decline slightly, considering the impact of previous cost-cutting initiatives.

Steady Capital Deployment: Franklin returns sufficient capital to its shareholders through dividends and share repurchases. Notably, the company adopted a new stock trading plan under Rule 10b5-1 in Mar 2015 to facilitate share buyback under its current repurchase program. In Jun 2016, it announced an additional repurchase authorization of up to 50 million shares. Moreover, driven by a healthy liquidity position, the company has hiked its dividend every year since its inception in 1981, the latest being 11% increase in Dec 2016. The company also paid a special cash dividend of $0.50 per share in Jan 2015.

Leverage: Franklin’s debt/equity ratio comes in at 0.13 against the S&P 500 average of 0.69, reflecting lower debt burden compared with the industry. It highlights the company’s sound financial flexibility.

Superior Return on Equity (ROE): Franklin’s ROE of 13.2%, as compared with the industry average of 11.1%, indicates the company’s commendable position over its peers.

Stock is Undervalued: Franklin has a P/E ratio and P/B ratio of 15.12x and 1.94x compared to the S&P 500 average of 18.67x and 3.20x, respectively. Based on these ratios, the stock seems undervalued.

Stocks to Consider

Cohen & Steers, Inc. (NYSE:CNS) has been witnessing upward estimate revisions for the last 30 days. Additionally, the stock jumped over 10% over the past six months. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

OM Asset Management PLC (NYSE:OMAM) has been witnessing upward estimate revisions for the last 30 days. Also, the company’s shares have risen nearly 5% over the last six months. It presently holds a Zacks Rank #2.

Lazard Ltd (NYSE:LAZ) has been witnessing upward estimate revisions for the last 30 days. Over the last six months, the company’s share price has been up more than 13%. It also carries a Zacks Rank #2.

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