- Wondering if SEI Investments at around US$90.68 is offering fair value right now, or if the recent price leaves limited room for upside.
- The stock has been relatively steady over the last week with a 0.4% decline, but the 15.6% return over 30 days and 17.3% return over 1 year, alongside 62.4% over 3 years and 53.0% over 5 years, puts recent performance firmly on investors' radar.
- Recent coverage has focused on SEI Investments as an established player in capital markets services, with investors paying attention to how it positions itself against peers and manages client assets. This broader interest helps frame the recent share price moves as part of an ongoing reassessment of the company rather than a short term swing.
- SEI Investments currently holds a value score of 4/6, and the rest of this article will unpack how different valuation methods arrive at that view, while also introducing a more complete way to think about valuation toward the end.
Approach 1: SEI Investments Excess Returns Analysis
The Excess Returns model looks at how much profit a company is expected to earn on its equity above the return that shareholders require, then converts those extra profits into a per share value today.
For SEI Investments, the model starts with a Book Value of $20.35 per share and a Stable EPS estimate of $6.78 per share, based on weighted future Return on Equity estimates from 4 analysts. The Average Return on Equity is 30.73%, while the Cost of Equity is $1.71 per share, implying an Excess Return of $5.07 per share. In other words, the earnings attributed to each share are projected to sit comfortably above the required return.
The Stable Book Value is $22.08 per share, sourced from weighted future Book Value estimates from 2 analysts. Combining these inputs, the Excess Returns model arrives at an intrinsic value of about $138.58 per share. At a recent share price of roughly $90.68, this approach suggests that SEI Investments is 34.6% undervalued according to this methodology.
Result: UNDERVALUED
Our Excess Returns analysis suggests SEI Investments is undervalued by 34.6%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.
Approach 2: SEI Investments Price vs Earnings
For a consistently profitable company like SEI Investments, the P/E ratio is a useful way to think about what you are paying for each dollar of earnings. Investors usually accept a higher P/E when they expect stronger earnings growth or see lower risk, and a lower P/E when growth expectations are more modest or risks are higher.
SEI Investments currently trades on a P/E of 14.77x. That sits below the Capital Markets industry average P/E of 42.43x and also below the peer group average of 16.56x, which hints that the market is assigning a lower earnings multiple than many comparable names. However, simple comparisons to peers or the wider industry can miss company specific factors.
Simply Wall St’s Fair Ratio for SEI Investments is 12.65x. This proprietary metric aims to estimate an appropriate P/E by taking into account elements such as the company’s earnings growth profile, industry, profit margins, market capitalization and risk characteristics. This makes it more tailored than a broad peer or industry comparison. With the current P/E of 14.77x sitting above the Fair Ratio, this approach indicates that the shares screen as somewhat expensive on earnings.
Result: OVERVALUED
P/E ratios tell one story, but what if the real opportunity lies elsewhere? Start investing in legacies, not executives. Discover our 18 top founder-led companies.
Upgrade Your Decision Making: Choose your SEI Investments Narrative
Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced as your way to connect a clear story about SEI Investments to specific assumptions for future revenue, earnings, margins and a Fair Value. You can then compare that to the current price to help you judge whether it looks attractive or stretched, and keep that view updated automatically on Simply Wall St’s Community page as new news or earnings arrive. For example, one investor might build a bullish SEI Investments Narrative around a Fair Value near US$115 with stronger revenue and earnings assumptions, while another might anchor a more cautious Narrative closer to US$67 with slower growth and lower P/E expectations, both using the same tool but different stories behind their numbers.
For SEI Investments, here are previews of two leading SEI Investments Narratives to make comparison easier:
Think of these as two clear stories using the same company data but different assumptions. One leans more optimistic on how earnings quality and buybacks might develop over time, and the other leans more cautious on growth, margins, and the valuation multiple the market might be willing to pay.
Fair value in this bullish narrative: US$104.00 per share.
Implied discount to that fair value at the recent US$90.68 price: about 12.8% undervalued.
Revenue growth assumption used in this narrative: 7.26% per year.
- Emphasizes continued investment in technology platforms, partnerships and outsourced solutions to support higher quality earnings and a stronger margin profile over time.
- Assumes disciplined capital allocation, with buybacks, dividends and balance sheet capacity all influencing earnings per share and aligning with the analyst consensus target.
- Recognizes risks around margin pressure, competition, client concentration and fee compression, but treats them as manageable within a long term growth and buyback narrative.
Fair value in this bearish narrative: US$67.00 per share.
Implied premium to that fair value at the recent US$90.68 price: about 35.3% overvalued.
Revenue growth assumption used in this narrative: 5.42% per year.
- Highlights reliance on alternative asset and private credit administration, where a slowdown in new fund launches or broader credit issues could influence revenue tied to invested capital.
- Assumes ongoing spending on technology and client projects, together with pressure on cash spread income and bank related implementation work, resulting in margins that do not move much higher.
- Incorporates a lower future P/E multiple and a higher discount rate, reflecting concern that buybacks and existing projects might not fully offset execution risk or slower growth.
Taken together, these Narratives outline a range of possible outcomes for SEI Investments, from a narrative that focuses on buybacks and margin resilience to one that allows for slower growth and a lower earnings multiple. They provide a structured way to consider which set of assumptions is closer to your own view.
See what the community is saying about SEI Investments
Do you think there's more to the story for SEI Investments? Head over to our Community to see what others are saying!
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Have feedback on this article? Concerned about the content? Get in touch with us directly. Alternatively, email editorial-team@simplywallst.com