Stock performance snapshot

Oppenheimer Holdings (OPY) has had mixed share price moves recently, with the stock down 0.8% on the day and down 4.3% over the past month, but up 6.6% over the past 3 months.

Year to date, the stock is up 29.8%, while the 1 year total return stands at 56.6%. Longer term numbers are stronger, with the 3 year total return at 14.5x and the 5 year total return at 11.5x.

The 1 day share price dip and 1 month share price return of down 4.3% sit against a much stronger picture, with year to date share price gains and multi year total shareholder returns indicating momentum that has built over time.

If you are comparing Oppenheimer Holdings with other financials, it can help to scan for companies with resilient balance sheets and steady fundamentals using the solid balance sheet and fundamentals stocks screener (47 results)

With Oppenheimer’s shares up strongly over 1 and 5 years and trading around $94.32, the key question is whether this middle market investment bank is still undervalued or if the market is already pricing in future growth.

Price-to-earnings of 10.4x: Is it justified?

On a P/E of 10.4x and a last close of $94.32, Oppenheimer Holdings trades at a lower earnings multiple than the US market and its Capital Markets peers. This suggests the stock is priced more conservatively than many comparable companies.

The P/E ratio compares the current share price to earnings per share, so a lower P/E often indicates that investors are paying less for each dollar of current earnings. For a middle market investment bank and broker dealer like Oppenheimer, this metric is a common shorthand for how the market is weighing its earnings profile, deal activity and fee based revenue streams.

Relative to the broader US market P/E of 18.9x, Oppenheimer’s 10.4x suggests the market is assigning a lower earnings multiple, despite OPY reporting high quality earnings and an improvement in net profit margin from 5.6% to 6%. That gap raises the question of whether investors are being cautious about its earnings history, which includes earnings declining by 13.6% per year over the past 5 years, even though the most recent year showed 27.6% earnings growth compared to the prior year.

The discount looks even starker against the US Capital Markets industry average P/E of 39.2x and the peer average of 19.8x, both of which are materially higher than Oppenheimer’s 10.4x. In simple terms, the market is valuing similar companies at nearly double or more of Oppenheimer’s earnings multiple, even though OPY’s 1 year total return has exceeded both the US market and the Capital Markets industry over the same period.

Result: Price-to-earnings of 10.4x (UNDERVALUED)

However, you also need to consider that earnings have declined by 13.6% a year over 5 years, and the valuation already reflects a very large intrinsic premium.

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Another view on value: cash flows tell a different story

Looking beyond earnings multiples, the SWS DCF model values Oppenheimer Holdings at about $56 per share, while the stock trades at $94.32. On this view, the shares look overvalued, which sits awkwardly beside the low 10.4x P/E that suggests the opposite. Which lens do you trust more?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out Oppenheimer Holdings for example). We show the entire calculation in full. You can track the result in your watchlist or portfolio and be alerted when this changes, or use our stock screener to discover 46 high quality undervalued stocks. If you save a screener we even alert you when new companies match - so you never miss a potential opportunity.

Next Steps

With mixed signals across valuation methods and recent price moves, sentiment is not straightforward, so it makes sense to review the data yourself and decide where you stand. To weigh both the caution flags and the potential upside, take a closer look at the 1 key reward and 1 important warning sign.

Looking for more investment ideas?

If OPY has caught your attention, do not stop here; broaden your watchlist with other stocks that fit different return and risk preferences across the market.

• Target potential mispriced opportunities by scanning for companies trading below what their fundamentals might support using the 46 high quality undervalued stocks.
• Strengthen your income focus by reviewing stocks that combine higher yields with resilience through the 10 dividend fortresses.
• Prioritise capital protection by filtering for companies with steadier risk profiles via the 63 resilient stocks with low risk scores.

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.