Broadridge (BR)

Financial technology provider Broadridge (NYSE:BR) fell short of the market’s revenue expectations in Q1 CY2025 as sales rose 4.9% year on year to $1.81 billion. Its non-GAAP profit of $2.44 per share was 1.2% above analysts’ consensus estimates.

Company Overview

Processing over $10 trillion in equity and fixed income trades daily and managing proxy voting for over 800 million equity positions, Broadridge Financial Solutions (NYSE:BR) provides technology-driven solutions that power investing, governance, and communications for banks, broker-dealers, asset managers, and public companies.

A combination of increasing reliance on data and analytics across various industries and the desire for cost efficiency through outsourcing could mean that companies in this space gain. As functions such as payroll, HR, and credit risk assessment rely on more digitization, key players in the data & business process services industry could be increased demand. On the other hand, the sector faces headwinds from growing regulatory scrutiny on data privacy and security, with laws like GDPR and evolving U.S. regulations potentially limiting data collection and monetization strategies. Additionally, rising cyber threats pose risks to firms handling sensitive personal and financial information, creating outsized headline risk when things go wrong in this area.

Broadridge's competitors include FIS Global (NYSE: FIS), Fiserv (NASDAQ: FISV), and SS&C Technologies (NASDAQ: SSNC) in financial technology services. In the investor communications space, it competes with Mediant Communications and AST Financial, while in wealth management technology, it faces competition from Envestnet (NYSE: ENV) and Orion Advisor Solutions.

Reviewing a company’s long-term sales performance reveals insights into its quality. Even a bad business can shine for one or two quarters, but a top-tier one grows for years.

With $6.77 billion in revenue over the past 12 months, Broadridge is one of the larger companies in the business services industry and benefits from a well-known brand that influences purchasing decisions.

As you can see below, Broadridge’s 9.1% annualized revenue growth over the last five years was impressive. This is an encouraging starting point for our analysis because it shows Broadridge’s demand was higher than many business services companies.

We at StockStory place the most emphasis on long-term growth, but within business services, a half-decade historical view may miss recent innovations or disruptive industry trends. Broadridge’s annualized revenue growth of 6.7% over the last two years is below its five-year trend, but we still think the results were respectable.

This quarter, Broadridge’s revenue grew by 4.9% year on year to $1.81 billion, falling short of Wall Street’s estimates.

Looking ahead, sell-side analysts expect revenue to grow 6.2% over the next 12 months, similar to its two-year rate. This projection is above average for the sector and indicates its newer products and services will help maintain its recent top-line performance.

Operating margin is one of the best measures of profitability because it tells us how much money a company takes home after subtracting all core expenses, like marketing and R&D.

Broadridge has been an efficient company over the last five years. It was one of the more profitable businesses in the business services sector, boasting an average operating margin of 14.9%.

Analyzing the trend in its profitability, Broadridge’s operating margin rose by 2.3 percentage points over the last five years, as its sales growth gave it operating leverage.

In Q1, Broadridge generated an operating profit margin of 19%, up 1.5 percentage points year on year. This increase was a welcome development and shows it was more efficient.

We track the long-term change in earnings per share (EPS) for the same reason as long-term revenue growth. Compared to revenue, however, EPS highlights whether a company’s growth is profitable.

Broadridge’s EPS grew at a spectacular 13% compounded annual growth rate over the last five years, higher than its 9.1% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

Diving into Broadridge’s quality of earnings can give us a better understanding of its performance. As we mentioned earlier, Broadridge’s operating margin expanded by 2.3 percentage points over the last five years. This was the most relevant factor (aside from the revenue impact) behind its higher earnings; taxes and interest expenses can also affect EPS but don’t tell us as much about a company’s fundamentals.

In Q1, Broadridge reported EPS at $2.44, up from $2.23 in the same quarter last year. This print beat analysts’ estimates by 1.2%. Over the next 12 months, Wall Street expects Broadridge’s full-year EPS of $8.50 to grow 4.5%.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Broadridge has shown robust cash profitability, giving it an edge over its competitors and the ability to reinvest or return capital to investors. The company’s free cash flow margin averaged 11.6% over the last five years, quite impressive for a business services business.

Taking a step back, we can see that Broadridge’s margin expanded by 4.4 percentage points during that time. This shows the company is heading in the right direction, and we can see it became a less capital-intensive business because its free cash flow profitability rose more than its operating profitability.

Broadridge’s free cash flow clocked in at $336.9 million in Q1, equivalent to a 18.6% margin. This result was good as its margin was 8.9 percentage points higher than in the same quarter last year, building on its favorable historical trend.

EPS and free cash flow tell us whether a company was profitable while growing its revenue. But was it capital-efficient? A company’s ROIC explains this by showing how much operating profit it makes compared to the money it has raised (debt and equity).

Although Broadridge has shown solid business quality lately, it historically did a mediocre job investing in profitable growth initiatives. Its five-year average ROIC was 14%, somewhat low compared to the best business services companies that consistently pump out 25%+.

We like to invest in businesses with high returns, but the trend in a company’s ROIC is what often surprises the market and moves the stock price. Over the last few years, Broadridge’s ROIC averaged 1.6 percentage point increases each year. its rising ROIC is a good sign and could suggest its competitive advantage or profitable growth opportunities are expanding.

Broadridge reported $317.2 million of cash and $3.43 billion of debt on its balance sheet in the most recent quarter. As investors in high-quality companies, we primarily focus on two things: 1) that a company’s debt level isn’t too high and 2) that its interest payments are not excessively burdening the business.

With $1.59 billion of EBITDA over the last 12 months, we view Broadridge’s 2.0× net-debt-to-EBITDA ratio as safe. We also see its $67 million of annual interest expenses as appropriate. The company’s profits give it plenty of breathing room, allowing it to continue investing in growth initiatives.

Revenue missed but EPS managed to beat. Overall, this was a mixed quarter that is unlikely to get the market excited. The stock traded down 1.6% to $238.15 immediately following the results.

Updated: May 21, 2025 at 11:58 PM EDT

Before deciding whether to buy Broadridge or pass, we urge investors to consider business quality, valuation, and the latest quarterly results.

There are things to like about Broadridge. To kick things off, its revenue growth was impressive over the last five years. And while its mediocre ROIC lags the market and is a headwind for its stock price, its impressive operating margins show it has a highly efficient business model. On top of that, its rising cash profitability gives it more optionality.

Broadridge’s P/E ratio based on the next 12 months is 26.9x. Looking at the business services space right now, Broadridge trades at a compelling valuation. If you’re a fan of the business and management team, now is a good time to scoop up some shares.

Wall Street analysts have a consensus one-year price target of $250.26 on the company (compared to the current share price of $239.09), implying they see 4.7% upside in buying Broadridge in the short term.

Want to invest in a High Quality big tech company? We’d point you in the direction of Microsoft and Google, which have durable competitive moats and strong fundamentals, factors that are large determinants of long-term market outperformance.

To get the best start with StockStory, check out our most recent stock picks, and then sign up for our earnings alerts by adding companies to your watchlist. We typically have quarterly earnings results analyzed within seconds of the data being released, giving investors the chance to react before the market has fully absorbed the information. This is especially true for companies reporting pre-market.