Stifel (SF)

Financial services firm Stifel Financial (NYSE:SF) reported revenue ahead of Wall Street’s expectations in Q3 CY2025, with sales up 16.7% year on year to $1.43 billion. Its non-GAAP profit of $1.95 per share was 3.1% above analysts’ consensus estimates.

Company Overview

Tracing its roots back to 1890 when the firm was established in St. Louis, Stifel Financial (NYSE:SF) is a financial services firm that provides wealth management, investment banking, and institutional brokerage services to individuals, corporations, and institutions.

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.

Stifel Financial competes with larger financial services firms like Morgan Stanley (NYSE:MS), Raymond James Financial (NYSE:RJF), and Jefferies Financial Group (NYSE:JEF), as well as regional investment banks and wealth management firms.

A company’s long-term performance is an indicator of its overall 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, Stifel grew its revenue at a decent 8% 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. Stifel’s annualized revenue growth of 11.1% 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, Stifel reported year-on-year revenue growth of 16.7%, and its $1.43 billion of revenue exceeded Wall Street’s estimates by 6.8%.

Assets Under Management (AUM) encompasses all client funds under a firm's investment management umbrella. The recurring fee structure on these assets provides consistent revenue generation, offering financial stability even during periods of poor investment returns, though sustained underperformance can impact future asset flows.

Stifel’s AUM has grown at an annual rate of 13.3% over the last five years, a step above the broader financials industry and faster than its total revenue. When analyzing Stifel’s AUM over the last two years, we can see that growth accelerated to 16.2% annually. Fundraising or short-term investment performance were net contributors for the company over this shorter period since assets grew faster than total revenue. But again, we put less weight on asset growth given how lumpy and cyclical it can be.

In Q3, Stifel’s AUM was $219.2 billion. This print was 18.3% higher than the same quarter last year.

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.

This is because for financials businesses, interest income and expense should be factored into the definition of profit but taxes - which are largely out of a company's control - should not.

Over the last four years, Stifel’s pre-tax profit margin has risen by 6.3 percentage points, going from 21.9% to 15.6%. It has also declined by 1.4 percentage points on a two-year basis, showing its expenses have consistently increased at a faster rate than revenue. This usually raises questions unless the company is in high-growth mode and reinvesting its profits into attractive ventures.

Stifel’s pre-tax profit margin came in at 20% this quarter. This result was 2.3 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.

Stifel’s unimpressive 9% annual EPS growth over the last five years aligns with its revenue performance. On the bright side, this tells us its incremental sales were profitable.

Like with revenue, we analyze EPS over a more recent period because it can provide insight into an emerging theme or development for the business.

Stifel’s two-year annual EPS growth of 15.5% was good and topped its 11.1% two-year revenue growth.

Diving into Stifel’s quality of earnings can give us a better understanding of its performance. A two-year view shows that Stifel has repurchased its stock, shrinking its share count by 2.8%. This tells us its EPS outperformed its revenue not because of increased operational efficiency but financial engineering, as buybacks boost per share earnings.

In Q3, Stifel reported adjusted EPS of $1.95, up from $1.50 in the same quarter last year. This print beat analysts’ estimates by 3.1%. Over the next 12 months, Wall Street expects Stifel’s full-year EPS of $6.38 to grow 43.7%.

Financial firms generate earnings through diverse intermediation activities, making them fundamentally balance sheet-driven enterprises. Investors focus on balance sheet quality and consistent book value compounding when evaluating these multifaceted financial institutions.

This is why we consider book value per share (BVPS) an important metric for the sector. BVPS represents the real net worth per share across all business segments, providing a clear measure of shareholder equity regardless of the complexity of operations. On the other hand, EPS is often distorted by the diverse nature of operations, mergers, and various accounting treatments across different business units. Book value provides clearer performance insights.

Stifel’s BVPS grew at a mediocre 7.2% annual clip over the last five years. BVPS growth has also recently decelerated a bit to 4.3% annual growth over the last two years (from $44.20 to $48.07 per share).

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, Stifel has averaged an ROE of 13.3%, healthy for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This is a bright spot for Stifel.

Leverage is core to a financial firm’s business model (loans funded by deposits). To ensure economic stability and avoid a repeat of the 2008 GFC, regulators require certain levels of capital and liquidity, focusing on the Tier 1 capital ratio.

Tier 1 capital is the highest-quality capital that a firm holds, consisting primarily of common stock and retained earnings, but also physical gold. It serves as the primary cushion against losses and is the first line of defense in times of financial distress.

This capital is divided by risk-weighted assets to derive the Tier 1 capital ratio. Risk-weighted means that cash and US treasury securities are assigned little risk while unsecured consumer loans and equity investments get much higher risk weights, for example.

New regulation after the 2008 financial crisis requires that all firms must maintain a Tier 1 capital ratio greater than 4.5%. On top of this, there are additional buffers based on scale, risk profile, and other regulatory classifications, so that at the end of the day, firms generally must maintain a 7-10% ratio at minimum.

Over the last two years, Stifel has averaged a Tier 1 capital ratio of 14.7%, which is considered safe and well capitalized in the event that macro or market conditions suddenly deteriorate.

We enjoyed seeing Stifel beat analysts’ revenue expectations this quarter. We were also glad its EPS outperformed Wall Street’s estimates. Zooming out, we think this was a good print with some key areas of upside. The stock traded up 1.1% to $113.50 immediately following the results.

Updated: December 4, 2025 at 11:15 PM EST

Before investing in or passing on Stifel, we urge you to understand the company’s business quality (or lack thereof), valuation, and the latest quarterly results - in that order.

Stifel doesn’t top our investment wishlist, but we understand that it’s not a bad business. First off, its revenue growth was decent over the last five years and is expected to accelerate over the next 12 months. And while Stifel’s yields were stuck in neutral over the last five years, its AUM growth was solid over the last five years.

Stifel’s P/E ratio based on the next 12 months is 13.3x. While this valuation is reasonable, we don’t really see a big opportunity at the moment. We're fairly confident there are better investments elsewhere.

Wall Street analysts have a consensus one-year price target of $129.86 on the company (compared to the current share price of $124.69).