According to PWC, the U.S. capital markets are experiencing the most prolonged period of high volatility since the 2008 financial crisis, owing to the Russia-Ukraine war, supply chain bottlenecks, record-high inflation, and the possibility of aggressive federal rate hikes. The high-yield bond market is estimated to witness certain downtrends with rising rates. Moreover, the overall growth estimates of the economy have also been slashed.
However, according to the IMF, the United states’ current economic stand looks strong enough to handle tightening federal policies. Therefore, oversold capital markets stocks possessing solid fundamentals could witness significant bounce backs in the near term.
Thus, it could be wise to bet on fundamentally strong capital markets stocks Piper Sandler Companies (PIPR) and Donnelley Financial Solutions, Inc. (DFIN).
Piper Sandler Companies (PIPR)
PIPR operates as an investment bank and institutional securities firm that serves corporations, private equity groups, public entities, non-profit entities, and institutional investors in the United States and internationally.
On February 10, 2022, chairman and CEO Chad R. Abraham said, “Beyond the record results, we remain focused on growth and returning capital to our shareholders. Including the $4.50 per share special dividend declared today, we will have returned $9.45 per share for 2021.”
PIPR's net revenues increased 59.7% year-over-year to $648.24 million for the fourth quarter ended December 31, 2021. Its adjusted net income came in at $142.18 million, up 89.7% year-over-year, while its adjusted EPS came in at $7.84, up 88% year-over-year.
PIPR’s forward non-GAAP P/E of 8.16x is 25.3% lower than the industry average of 10.92x.
Analysts expect PIPR's revenue to reach $1.74 billion in 2023, increasing at 9.2% year-over-year. In addition, the company's EPS is expected to increase 12.3% to $15.25 in 2023. Also, it surpassed Street EPS estimates in each of the trailing four quarters. The stock has declined 36.1% over the past three months to close yesterday's trading session at $112.30.
PIPR's strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In addition, it has a B grade for Value and Quality. It is ranked #1 of 22 stocks in the B-rated Investment Brokerage industry. Click here to see the additional POWR Ratings for PIPR (Growth, Momentum, Stability, and Sentiment).
Donnelley Financial Solutions, Inc. (DFIN)
DFIN operates as a risk and compliance solutions company worldwide. It has four segments: Capital Markets Software Solutions (CM-SS); Capital Markets Compliance and Communications Management (CM-CCM); Investment Companies Software Solutions (IC-SS); and Investment Companies Compliance and Communications Management (IC-CCM).
On February 22, 2022, DFIN's president and CEO Daniel N. Leib said, “Looking ahead to 2022, we remain committed to executing our strategy of being the market-leading provider of regulatory and compliance solutions.”
DFIN’s total net sales came in at $232.80 million, up 10.7% year-over-year for the fourth quarter ended December 31, 2021. Its non-GAAP net earnings came in at $37.70 million, up 216.8% year-over-year. Also, its EPS came in at $0.73, compared to a loss per share of $1.07.
DFIN’s forward non-GAAP P/E of 7.54x is 31% lower than the industry average of 10.92x.
For 2023, analysts expect DFIN’s revenue to be $920.07 million, representing a 1.7% year-over-year rise. The company’s EPS is expected to increase 10% per annum for the next five years. It has surpassed EPS estimates in three of the trailing four quarters. Over the past three months, the stock has declined 25.9% to close yesterday’s trading session at $30.56.
DFIN has an overall B rating, equating to a Buy in our POWR Ratings system. The stock has an A grade for Value and a B grade for Quality. Within the Financial Services (Enterprise) industry, it is ranked #7 out of 112 stocks.
Click here to see the additional POWR Ratings for Growth, Momentum, Stability, and Sentiment for DFIN.
PIPR shares were trading at $112.82 per share on Tuesday afternoon, up $0.52 (+0.46%). Year-to-date, PIPR has declined -34.54%, versus a -7.32% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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