On Thursday, Wolfe Research initiated coverage on Jack Henry & Associates (NASDAQ:JKHY), a prominent provider of technology solutions and payment processing services for the financial industry, with a Peerperform rating.
The firm noted that Jack Henry's stock has seen a 6% increase year-to-date, in contrast to the S&P 500's 8% rise. Reflecting on the previous year, Jack Henry's shares experienced a 6% decline, while the S&P 500 gained 23%.
The analyst highlighted Jack Henry's current trading valuation at approximately 29 times its calendar year 2025 GAAP earnings per share (EPS) and 30 times its adjusted EPS. Historically, the company's next twelve months (NTM) price-to-earnings (PE) ratio has fluctuated between 48x and 20x over the last decade, with a median of 32x.
In the last three years, the stock has traded within a range of 27x to 39x, averaging around 34x. The last twelve months (LTM) saw the shares moving between 27x and 33x, with a median PE ratio of 30.3x.
Wolfe Research pointed out Jack Henry's niche market focus and exceptional customer retention as key strengths. The company's core banking systems are deeply integrated into the daily operations of regional and community banks and credit unions throughout the United States. This integration is expected to continue driving peer-leading high single-digit revenue growth over the medium term.
The firm further emphasized Jack Henry's impressive customer retention rate of 99.8%, which underscores the dependency of banks on the company's systems. The regulatory environment, which often discourages financial institutions from changing foundational systems, contributes to high switching costs. These factors underpin a business model with over 90% recurring revenue, suggesting that Jack Henry's stock could offer a low beta profile with downside protection.
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