Jack Henry has followed the market’s trajectory closely, rising in tandem with the S&P 500 over the past six months. The stock has climbed by 7.4% to $189.14 per share while the index has gained 10.4%.
Is now the time to buy JKHY? Find out in our full research report, it’s free.
Why Does Jack Henry Spark Debate?
Founded in 1976 by two entrepreneurs who saw the need for specialized banking software in the early days of financial computing, Jack Henry & Associates (NASDAQ:JKHY) provides technology solutions that help banks and credit unions innovate, differentiate, and compete while serving the evolving needs of their accountholders.
Two Things to Like:
1. EPS Moving Up Steadily
Analyzing the long-term change in earnings per share (EPS) shows whether a company's incremental sales were profitable – for example, revenue could be inflated through excessive spending on advertising and promotions.
Jack Henry’s EPS grew at a decent 11.4% compounded annual growth rate over the last five years, higher than its 7.4% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.
2. Stellar ROE Showcases Lucrative Growth Opportunities
Return on equity (ROE) measures how effectively banks generate profit from each dollar of shareholder equity - a critical funding source. High-ROE institutions typically compound shareholder wealth faster over time through retained earnings, share repurchases, and dividend payments.
Over the last five years, Jack Henry has averaged an ROE of 23.8%, exceptional for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Jack Henry has a strong competitive moat.
One Reason to be Careful:
Long-Term Revenue Growth Disappoints
Examining a company’s long-term performance can provide clues about its quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
Over the last five years, Jack Henry grew its revenue at a mediocre 7.4% compounded annual growth rate. This wasn’t a great result compared to the rest of the financials sector, but there are still things to like about Jack Henry.
Final Judgment
Jack Henry’s positive characteristics outweigh the negatives, but at $189.14 per share (or 29.6× forward P/E), is now the right time to buy the stock? See for yourself in our comprehensive research report, it’s free.
Stocks We Like Even More Than Jack Henry
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