Franklin Resources Inc (NYSE: BEN)

Sector: Financial Services Industry: Asset Management CIK: 0000038777
Market Cap 15.70 Bn
P/B 1.29
P/E 25.45
P/S 1.77
ROIC (Qtr) 1.83
Div Yield % 4.69
Rev 1y % (Qtr) 3.35
Total Debt (Qtr) 14.21 Bn
Debt/Equity (Qtr) 1.17
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About

Franklin Resources, Inc., widely known as Franklin Templeton, is a global investment management organization operating in the financial services industry. With a rich history dating back to 1947, the company is listed on the New York Stock Exchange (NYSE) under the ticker symbol BEN and is a member of the Standard & Poor's 500 Index. Franklin Templeton is a holding company with subsidiaries that include prominent names such as Franklin Templeton, Alcentra, Benefit Street Partners, Brandywine Global, Clarion Partners, ClearBridge Investments, Fiduciary...

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Investment thesis

Bull case

  • Operating cash flow of 956.20M provides exceptional 20.43x coverage of minority interest expenses 46.80M, showing strong core operations.
  • Operating cash flow of 956.20M provides exceptional 10.37x coverage of interest expenses 92.20M, showing strong debt service capability.
  • Robust free cash flow of 882.80M exceeds capital expenditure of 73.40M by 12.03x, indicating strong organic growth funding capability.
  • Cash position of 3.48B provides exceptional 74.46x coverage of minority interest expenses 46.80M, indicating strong liquidity.
  • Free cash flow of 882.80M provides exceptional 9.57x coverage of interest expense 92.20M, showing strong debt service ability.

Bear case

  • Operating cash flow of 956.20M barely covers its investment activities of (2B), with a coverage ratio of -0.48, indicating heavy reliance on external financing for growth which may not be sustainable in a tighter credit environment.
  • Operating cash flow of 956.20M provides thin coverage of dividend payments of (687.70M) with a -1.39 ratio, suggesting potential dividend sustainability issues if operational performance deteriorates.
  • Cash reserves of 3.48B provide limited coverage of acquisition spending of (160.20M), which is -21.75x, suggesting aggressive expansion might strain liquidity if market conditions deteriorate.
  • The company's operating cash flow of 956.20M shows concerning coverage of stock compensation expenses of 217.20M, with a 4.40 ratio indicating potential earnings quality issues.
  • Operating earnings of 970.80M show weak coverage of depreciation charges of 555.30M, with a 1.75 ratio indicating high capital intensity and potential reinvestment needs.

Product and Service Breakdown of Revenue (2017)

Geographical Breakdown of Revenue (2017)

Peer comparison

Companies in the Asset Management
S.No. Ticker Company Market Cap P/E P/S Total Debt (Qtr)
1 BLK BlackRock, Inc. 199.59 Bn 85.40 21.98 15.04 Bn
2 BN BROOKFIELD Corp /ON/ 103.94 Bn 31.52 5.64 262.97 Bn
3 AMP Ameriprise Financial Inc 88.69 Bn 55.02 7.20 5.89 Bn
4 BX Blackstone Inc. 88.51 Bn 49.39 10.93 12.89 Bn
5 KKR KKR & Co. Inc. 55.86 Bn 28.33 13.23 53.12 Bn
6 STT State Street Corp 46.52 Bn 21.77 3.91 34.72 Bn
7 NTRS Northern Trust Corp 34.14 Bn 33.31 6.71 15.64 Bn
8 RJF Raymond James Financial Inc 32.89 Bn 37.63 4.14 5.10 Bn

Industry comparisons

Current Valuation Value Ind Avg Percentile
EV to Assets EV to Assets 0.78 0.94
EV to Cash from Ops. EV/CFO 26.59 41.10
EV to Debt EV to Debt 1.79 15.28
EV to EBIT EV/EBIT 26.19 23.47
EV to EBITDA EV/EBITDA 20.82 47.80
EV to Free Cash Flow [EV/FCF] EV/FCF 28.80 38.62
EV to Market Cap EV to Market Cap 1.62 7.81
EV to Revenue EV/Rev 2.87 27.38
Price to Book Value [P/B] P/B 1.29 2.34
Price to Earnings [P/E] P/E 25.45 11.81
Dividend Metrics Value Ind Avg Percentile
Dividend Coverage Ratio Div Coverage (Qtr) 0.90 4.66
Dividend Payout Ratio % Div Payout % (Qtr) 119.40 -5.56
Dividend per Basic Share Div per Share (Qtr) 1.29 1.73
FCF Dividend Payout Ratio % FCF Div Payout % (Qtr) 76.11 49.83
Interest Coverage Int. cover (Qtr) 10.53 25.16
Growth Metrics Value Ind Avg Percentile
Capex Growth (1y) % Capex 1y % (Qtr) 68.00 -35.10
Cash and Equivalents Growth (1y) % Cash & Equiv 1y % (Qtr) -4.40 15.43
Dividend Growth (1y) % Div 1y % (Qtr) 3.20 1.65
EBIAT Growth (1y) % EBIAT 1y % (Qtr) 54.53 -90.82
EBITDA Growth (1y) % EBITDA 1y % (Qtr) 25.28 35.24
EBIT Growth (1y) % EBIT 1y % (Qtr) 38.67 -22.13
EBT Growth (1y) % EBT 1y % (Qtr) 46.78 -163.05
EPS Growth (1y) % EPS 1y % (Qtr) 66.15 -20.61
FCF Growth (1y) % FCF 1y % (Qtr) 4.03 220.21
Gross Profit Growth (1y) % Gross Profit 1y % (Qtr) 1.23 -53.96
Liquidity Ratios Value Ind Avg Percentile
Asset Utilization Ratio Asset Util Ratio (Qtr) 0.27 0.22
Cash Payout Ratio Cash Payout (Qtr) 0.67 0.36
Cash Ratio Cash Ratio (Qtr) 0.00 0.38
Current Ratio Curr Ratio (Qtr) 0.00 0.86
Debt to Equity Ratio Debt/Equity (Qtr) 1.17 0.70
Interest Cover Ratio Int Coverage (Qtr) 10.53 25.16
Times Interest Earned Times Interest Earned (Qtr) 10.53 25.16
Profitability Value Ind Avg Percentile
EBITDA Margin % EBITDA Margin % (Qtr) 17.30 -114.76
EBIT Margin % EBIT Margin % (Qtr) 10.97 -127.24
EBT Margin % EBT Margin % (Qtr) 9.93 -150.97
Gross Margin % Gross Margin % (Qtr) 100.00 67.88
Net Profit Margin % Net Margin % (Qtr) 7.00 -148.68