State Street (STT) has moved to refine its capital structure, filing amendments in Massachusetts to define its new Series L preferred stock after completing a $500 million offering of callable, non cumulative, perpetual depositary shares.
See our latest analysis for State Street.
The preferred offering and related amendments come at a time when State Street’s share price has moved firmly higher, with a 90 day share price return of 27.94% and a 1 year total shareholder return of 78.08%, which points to strong momentum rather than a short term spike.
If these capital moves have your attention and you want to widen your watchlist beyond large financials, this is a good moment to uncover 21 top founder-led companies
State Street now pairs a long established custody and asset management franchise with fresh preferred capital in the mix. The business looks strong. The live question is whether the stock price already reflects that strength.
Most Popular Narrative: 10.2% Undervalued
The most followed narrative on State Street currently points to a fair value of $215 per share, which sits above the last close at $193.04. That gap reflects a view that recent earnings, profitability metrics and capital moves are not yet fully captured in the share price.
The assumed bullish price target for State Street is $215.0, which represents up to two standard deviations above the consensus price target of $196.89. This valuation is based on what can be assumed as the expectations of State Street's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
Want to see what sits behind that higher fair value for State Street? The narrative leans on rising fee income, stronger margins and a richer earnings profile over the next few years. Curious which assumptions really move the needle in that model.
Result: Fair Value of $215 (UNDERVALUED)
Have a read of the narrative in full and understand what's behind the forecasts.
However, there is still meaningful risk that fee compression or less favorable interest rate moves, especially in key non U.S. currencies, could undermine this bullish State Street narrative.
Find out about the key risks to this State Street narrative.
Another View On State Street’s Valuation
The first narrative leans on analyst forecasts to argue State Street is 10.2% undervalued at a fair value of $215 per share. Our DCF model points to a value of $189.83 instead, slightly below the current $193.04 price, which implies limited upside on this lens.
For readers who want to see exactly how this cash flow based view is built, Look into how the SWS DCF model arrives at its fair value.
Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out State Street for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 53 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.
Next Steps
With mixed signals across State Street’s narratives, now is a good time to review the full picture and stress test your own thesis. To see the balance of potential upsides and key concerns in one place, start with 5 key rewards and 1 important warning sign
Looking for more investment ideas beyond State Street?
Do not stop with State Street. A wider watchlist can reveal opportunities you did not expect, so give yourself room to compare, filter and act with confidence.
- Target potential underpriced opportunities by scanning companies with strong fundamentals using the 53 high quality undervalued stocks
- Strengthen your core holdings by focusing on companies with robust finances through the solid balance sheet and fundamentals stocks screener (50 results)
- Spot underfollowed opportunities early by checking the screener containing 19 high quality undiscovered gems
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