• If you are wondering whether Franklin Resources stock still offers value at current levels, it helps to start with how the market has been treating it recently and what that might imply about expectations.
• The stock last closed at US$30.52, with returns of 1.8% over 7 days, 28.3% over 30 days, 28.2% year to date, and 54.8% over 1 year. This puts recent price action firmly on investors' radar.
• Recent news coverage has focused on Franklin Resources' position as a global asset manager and its exposure to shifts in investor sentiment toward active and passive investment products. This context is important when thinking about how the market is pricing the stock today and what risks or opportunities investors may be weighing.
• Franklin Resources currently has a valuation score of 3 out of 6. The next sections will walk through the standard valuation approaches investors often use, before finishing with a broader way to think about whether that score really captures the full picture of value.

Approach 1: Franklin Resources Excess Returns Analysis

The Excess Returns model asks a simple question: after paying the required return to shareholders, how much profit is left over on the equity invested in the business, and what is that stream of “excess” worth today per share.

For Franklin Resources, the starting point is a Book Value of US$23.33 per share and a Stable EPS estimate of US$2.48 per share, based on weighted future Return on Equity estimates from 4 analysts. The implied Average Return on Equity is 10.44%, while the Cost of Equity is US$1.96 per share, leaving an Excess Return of US$0.52 per share. The model also uses a Stable Book Value of US$23.78 per share, sourced from the median book value over the past 5 years.

When those excess returns are projected forward and discounted, the Excess Returns model points to an estimated intrinsic value of about US$34.84 per share. Compared with the recent share price of US$30.52, this indicates that, on this framework, the stock is trading around 12.4% below the model’s estimated value.

Result: UNDERVALUED

Our Excess Returns analysis suggests Franklin Resources is undervalued by 12.4%. Track this in your watchlist or portfolio, or discover 51 more high quality undervalued stocks.

Approach 2: Franklin Resources Price vs Earnings

For profitable companies, the P/E ratio is a useful gauge of what investors are currently willing to pay for each dollar of earnings, which gives you a quick read on how the market is viewing the stock relative to its profitability.

What counts as a “normal” or “fair” P/E usually reflects expectations for future earnings growth and the perceived risk of those earnings. Higher expected growth or lower perceived risk can justify a higher P/E, while lower growth or higher risk tend to support a lower P/E.

Franklin Resources is trading on a P/E of 23.41x. That sits below the Capital Markets industry average of 42.83x and below the peer average of 31.94x. Simply Wall St also calculates a proprietary “Fair Ratio” of 16.80x for Franklin Resources, which indicates the P/E that might be expected given its earnings profile, industry, margins, market cap and risk characteristics.

This Fair Ratio can be more informative than a simple comparison with peers or the industry, because it attempts to adjust for the company’s own growth outlook, profitability, risks and size. When set against the current P/E of 23.41x, the Fair Ratio of 16.80x suggests the stock is trading at a higher multiple than this model implies.

Result: OVERVALUED

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Upgrade Your Decision Making: Choose your Franklin Resources Narrative

Earlier it was mentioned that there is an even better way to understand valuation, so Narratives are introduced here as your way to attach a clear story about Franklin Resources to the numbers. This involves spelling out what you think happens to its revenue, earnings and margins, linking that story to a financial forecast and a fair value on Simply Wall St’s Community page, then comparing that fair value with the current price to decide whether the stock looks attractive or not. Your Narrative automatically refreshes when new news or earnings arrive. For example, a more cautious investor might side with a fair value around US$21.00, while a more optimistic investor might lean toward fair values closer to US$27.36 or even US$35.05. All of these are visible as different Narratives on the same company.

For Franklin Resources, however, we will make it really easy for you with previews of two leading Franklin Resources Narratives:

Start with the bullish lens if you think the Excess Returns result and buybacks point to more upside, or use the bearish lens if you are more focused on fee pressure, competition and the risk of a lower P/E over time.

Fair value in this bullish narrative: US$35.05 per share.

Implied upside to that fair value from the last close of US$30.52 is about 12.9%.

Revenue growth assumption used in this narrative: 113.5%.

• This narrative assumes higher future earnings supported by steady revenue growth, rising profit margins and ongoing share buybacks that reduce the share count over time.
• It sees Franklin Resources benefiting from global distribution, expansion in alternatives and retirement solutions, and the use of blockchain and tokenization to improve efficiency and open new product channels.
• It frames the bullish analyst price target at US$31.00 within a wider range of views and encourages you to weigh those assumptions on revenue, margins and P/E against your own expectations.

Fair value in this bearish narrative: US$21.00 per share.

Implied downside to that fair value from the last close of US$30.52 is about 45.2%.

Revenue trend assumption used in this narrative: 1.72% annual decline.

• This narrative assumes ongoing pressure on active fund fees, assets under management and earnings as investors shift toward passive products and lower cost digital competitors.
• It highlights the burden of higher operating and regulatory costs, the lack of very large scale advantages and uncertainty around the long term payoff from digital and tokenization investments.
• It anchors on a US$21.00 price target that sits well below recent trading levels, with the view that current expectations for growth and the P/E multiple may be too optimistic.

Both narratives use the same company and industry data but arrive at very different conclusions about what a fair price looks like. The real value for you is in seeing which story, assumptions and risk balance feel closer to how you think Franklin Resources is likely to progress over the coming years, and then sizing any position to match that conviction.

Do you think there's more to the story for Franklin Resources? Head over to our Community to see what others are saying!

This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.