Analyst upgrade puts PJT Partners (PJT) back in focus

PJT Partners (PJT) moved into the spotlight after Keefe, Bruyette & Woods shifted its rating to Outperform, highlighting the firm’s exposure to large cap and complex M&A advice as a key factor.

At a US$150.00 share price, PJT Partners has recently seen a 7.15% 7 day share price return and a 7.43% 30 day share price return. The 1 year total shareholder return of 16.68% sits against weaker year to date share price performance and a 3 year total shareholder return above 100%. This suggests that longer term momentum contrasts with more mixed recent sentiment as analyst views reset around boutique investment banks.

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With PJT trading around US$150, recent analyst moves and a modest discount to consensus targets raise the key question for you: is there still mispricing here, or are markets already baking in the next leg of growth?

Price-to-Earnings of 20.1x: Is it justified?

PJT Partners currently trades on a P/E of 20.1x, which sits below both the US Capital Markets industry average and the peer group average, even after the recent share price move.

The P/E multiple compares the current share price to earnings per share and is often used for fee based, asset light businesses like advisory firms. A lower P/E relative to similar companies can indicate the market is assigning a more cautious earnings outlook or simply has not repriced the stock in line with recent profit trends.

For PJT, the current P/E of 20.1x is described as good value versus the US Capital Markets industry average of 39.1x and also looks slightly cheaper than the peer average of 21.5x. That spread is meaningful and suggests the market is not paying the same premium for PJT's earnings as it is for comparable names, even with earnings growth of 34% over the past year and a 5 year earnings growth rate of 8.1% per year.

This relative discount on earnings, alongside recent profit growth, is one reason some investors may view PJT as a potential re-rating candidate rather than a fully priced story at current levels.

Result: Price-to-Earnings of 20.1x (UNDERVALUED)

However, recent 90 day and year to date share price declines, alongside any slowdown in advisory deal activity, could limit how quickly any rerating thesis plays out.

Another way of looking at PJT’s value

While the 20.1x P/E suggests PJT may be on the cheaper side versus peers, the SWS DCF model tells a very different story. With the shares at $150 and the model pointing to a future cash flow value of $29.30, the DCF view screens as clearly overvalued. Which lens do you trust more for a fee based advisory firm like this?

Simply Wall St performs a discounted cash flow (DCF) on every stock in the world every day (check out PJT Partners 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 62 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

If this mix of signals leaves you unsure, that is a useful starting point. Now is the time to look at the positives in detail and weigh them against your own expectations with 2 key rewards

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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.