In looking for the most overvalued stocks, we considered metrics like price-to-sales, rapid stock price appreciation not supported by comparable financial growth, pricing and revenue pressure from competition, and future predictions of success like forward P/E. All of the stocks that we examined are large caps, and we have made an attempt to look across as many industries as possible.
Franklin Resources. (BEN) The large mutual fund and institutional investing firm trades at about $109, near its 52-week high. This is up from $29 in October 2003. The company currently has a price-to-sales ratio of 5.66 Janus Capital’s price-to-sales is 4.0. Legg Mason trades at 3.3 times.
In it most recent quarter, growth in revenue and assets under management slowed from the immediately previous quarter. The stock is actually down from the day of the earnings announcement on October 26. Assets under management grew 3% in October to $526.8 billion.
Franklin’s shares were recently downgraded by Prudential from “overweight” to “neutral” on growth and valuation concerns. Like almost all firms in the financial services sector, especially those in the consumer segment, Franklin has risk of both a drop in the stock market and any slowdown in asset growth due to a slumping economy and housing sector.
Morningstar’s “fair value estimate” for Franklin’s stock is only $77.
Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.
Sponsored: Want to Retire Early? Here’s a Great First Step
Want retirement to come a few years earlier than you’d planned? Or are you ready to retire now, but want an extra set of eyes on your finances?
Now you can speak with up to 3 financial experts in your area for FREE. By simply clicking here you can begin to match with financial professionals who can help you build your plan to retire early. And the best part? The first conversation with them is free.
Click here to match with up to 3 financial pros who would be excited to help you make financial decisions.
Thank you for reading! Have some feedback for us?
Contact the 24/7 Wall St. editorial team.