State Street has had an impressive run over the past six months as its shares have beaten the S&P 500 by 7.5%. The stock now trades at $116.88, marking a 28.8% gain. This was partly due to its solid quarterly results, and the performance may have investors wondering how to approach the situation.
Is there a buying opportunity in State Street, or does it present a risk to your portfolio? See what our analysts have to say in our full research report, it’s free for active Edge members.
Why Is State Street Not Exciting?
We’re glad investors have benefited from the price increase, but we're cautious about State Street. Here are two reasons there are better opportunities than STT and a stock we'd rather own.
1. Long-Term Revenue Growth Disappoints
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but many enduring ones grow for years.
Unfortunately, State Street’s 3% annualized revenue growth over the last five years was sluggish. This fell short of our benchmarks.
2. EPS Barely Growing
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
State Street’s EPS grew at an unimpressive 7.3% compounded annual growth rate over the last five years. On the bright side, this performance was better than its 3% annualized revenue growth and tells us the company became more profitable on a per-share basis as it expanded.
Final Judgment
State Street isn’t a terrible business, but it doesn’t pass our bar. With its shares beating the market recently, the stock trades at 10.5× forward P/E (or $116.88 per share). While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're pretty confident there are more exciting stocks to buy at the moment. We’d recommend looking at an all-weather company that owns household favorite Taco Bell.
Stocks We Would Buy Instead of State Street
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