Piper Sandler (PIPR)

Investment banking firm Piper Sandler (NYSE:PIPR) reported Q4 CY2025 results topping the market’s revenue expectations, with sales up 33.6% year on year to $666.1 million. Its non-GAAP profit of $6.88 per share was 44.5% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1895 and rebranded from Piper Jaffray in 2020, Piper Sandler (NYSE:PIPR) is an investment bank that provides advisory services, capital raising, institutional brokerage, and research for corporations, governments, and institutional investors.

Investment banks and brokerages facilitate capital raises, mergers and acquisitions, and securities trading. The sector benefits from corporate activity during economic expansion, increased retail trading participation, and advisory opportunities in emerging sectors. Headwinds include economic cycle vulnerability affecting deal flow, compressed trading commissions due to electronic platforms, and regulatory capital requirements constraining certain higher-risk activities.

Piper Sandler competes with other middle-market investment banks such as Jefferies Financial Group (NYSE:JEF), Raymond James Financial (NYSE:RJF), Houlihan Lokey (NYSE:HLI), and Lazard (NYSE:LAZ), as well as the middle-market divisions of larger financial institutions like Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS).

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. Over the last five years, Piper Sandler grew its revenue at a decent 9.1% compounded annual growth rate. Its growth was slightly above the average financials company and shows its offerings resonate with customers.

Long-term growth is the most important, but within financials, a half-decade historical view may miss recent interest rate changes and market returns. Piper Sandler’s annualized revenue growth of 19.8% over the last two years is above its five-year trend, suggesting its demand recently accelerated. Note: Quarters not shown were determined to be outliers, impacted by outsized investment gains/losses that are not indicative of the recurring fundamentals of the business.

This quarter, Piper Sandler reported wonderful year-on-year revenue growth of 33.6%, and its $666.1 million of revenue exceeded Wall Street’s estimates by 28.5%.

Revenue growth is one major determinant of business quality, and the efficiency of operations is another. For Investment Banking & Brokerage companies, we look at pre-tax profit rather than the operating margin that defines sectors such as consumer, tech, and industrials.

Interest income and expenses play a big role in financial institutions' profitability, so they should be factored into the definition of profit. Taxes, however, should not as they are largely out of a company's control. This is pre-tax profit by definition.

Over the last five years, Piper Sandler’s pre-tax profit margin has fallen by 14.1 percentage points, going from 22.3% to 19.6%. It has also expanded by 10.4 percentage points on a two-year basis, showing its expenses have consistently grown at a slower rate than revenue. This typically signals prudent management.

In Q4, Piper Sandler’s pre-tax profit margin was 28.3%. This result was 11.9 percentage points better than the same quarter last year.

Revenue trends explain a company’s historical growth, but the long-term change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Piper Sandler’s EPS grew at a decent 12.2% 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.

Like with revenue, we analyze EPS over a shorter period to see if we are missing a change in the business.

For Piper Sandler, its two-year annual EPS growth of 38.3% was higher than its five-year trend. This acceleration made it one of the faster-growing financials companies in recent history.

In Q4, Piper Sandler reported adjusted EPS of $6.88, up from $4.80 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street expects Piper Sandler’s full-year EPS of $17.74 to grow 3.1%.

Return on equity (ROE) reveals the profit generated per dollar of shareholder equity, which represents a key source of bank funding. Banks maintaining elevated ROE levels tend to accelerate wealth creation for shareholders via earnings retention, buybacks, and distributions.

Over the last five years, Piper Sandler has averaged an ROE of 14.6%, healthy for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Piper Sandler has a decent competitive moat.

The debt-to-equity ratio is a widely used measure to assess a company's balance sheet health. A higher ratio means that a business aggressively financed its growth with debt. This can result in higher earnings (if the borrowed funds are invested profitably) but also increases risk.

If debt levels are too high, there could be difficulties in meeting obligations, especially during economic downturns or periods of rising interest rates if the debt has variable-rate payments.

Piper Sandler has no debt, so leverage is not an issue here.

It was good to see Piper Sandler beat analysts’ EPS expectations this quarter. We were also excited its revenue outperformed Wall Street’s estimates by a wide margin. Zooming out, we think this was a good print with some key areas of upside. The stock remained flat at $334.54 immediately after reporting.

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

Piper Sandler is a rock-solid business worth owning. For starters, its revenue growth was decent over the last five years. On top of that, its expanding pre-tax profit margin shows the business has become more efficient, and its solid ROE suggests it has grown profitably in the past.

Piper Sandler’s P/E ratio based on the next 12 months is 18.1x. Analyzing the financials landscape today, Piper Sandler’s positive attributes shine bright. We like the stock at this price.

Wall Street analysts have a consensus one-year price target of $410.67 on the company (compared to the current share price of $334.54), implying they see 22.8% upside in buying Piper Sandler in the short term.