Leadership move in aerospace and defense investment banking

Oppenheimer Holdings (OPY) shares are in focus after subsidiary Oppenheimer & Co. appointed Bill Farmer as Managing Director and Head of Aerospace & Defense Technology Investment Banking, a role centered on mergers, acquisitions and capital markets execution.

The leadership change comes as Oppenheimer Holdings’ share price has moved sharply higher in recent months, with a 30 day share price return of 22.71% and year to date share price return of 43.69%. The 1 year total shareholder return sits at 101.80%, which points to strong momentum rather than a short lived reaction to a single appointment.

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With OPY up 101.80% over the past year and an intrinsic value model implying a premium to current fundamentals, the key question now is whether there is still an entry point here or if the market is already pricing in future growth.

Preferred P/E of 7.5x: Is it justified?

Oppenheimer Holdings last closed at $104.38 and is on a P/E of 7.5x, which screens as inexpensive relative to both the wider US market and its capital markets peers.

The P/E ratio links the share price to the company’s earnings, so it is often used to judge how much investors are currently paying for each dollar of profit. For a middle market investment bank and broker dealer like Oppenheimer, this can give you a quick sense of how its earnings profile is being valued compared with other listed financial firms.

Here, the P/E of 7.5x sits below the US market average of 19.1x. This suggests the market is assigning a lower earnings multiple despite the company reporting earnings growth of 107.4% over the past year and higher net profit margins of 9.6% compared with 5.3% previously. That combination of a comparatively low multiple and strong recent earnings momentum raises the question of whether investors are cautious about the sustainability of that profit rebound or are simply yet to re rate the stock.

The discount is even more pronounced against the US Capital Markets industry, where the average P/E is 39.1x and Oppenheimer’s 7.5x ratio sits far below that level. On this basis, the company appears to trade at a steep earnings discount to peers while having outpaced the industry’s 19.1% earnings growth over the past year. This is a clear contrast investors may want to examine more closely.

Result: Price-to-earnings of 7.5x (UNDERVALUED)

However, there is still clear risk that earnings normalise from recent highs or that capital markets activity slows, which could challenge the current P/E discount narrative.

Another view: DCF points in the opposite direction

While the 7.5x P/E suggests OPY looks inexpensive, the SWS DCF model tells a very different story. With the share price at $104.38 versus an estimated future cash flow value of $54.44, the DCF view implies the stock is trading at a clear premium. So which lens should you treat as more important?

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 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

Given the mixed signals around valuation and sentiment, it helps to get comfortable with the numbers yourself and move quickly from headline impressions to your own conclusion. You can start with 2 key rewards and 2 important warning signs

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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.