As of July 18, 2023, the Bank of New York Mellon Corp (BK, Financial) is trading at $45.33, marking a 4.11% increase for the day. With a market cap of $35.8 billion and sales of $16.5 billion, the company's financial metrics paint a promising picture. The stock is deemed to be fairly valued with a GF Value of $49.95, according to GuruFocus calculations. This valuation is based on historical trading multiples, past performance, and analyst estimates of future business performance.
Bank of New York Mellon is a global investment company involved in managing and servicing financial assets throughout the investment lifecycle. With approximately $44.3 trillion under custody and administration, it stands as the largest global custody bank worldwide. The bank provides financial services for institutions, corporations, and individual investors, operating in 35 countries and over 100 markets. BNY Mellon's asset-management division manages about $1.8 trillion in assets.
Valuation and Future Returns
Given that Bank of New York Mellon (BK, Financial) is fairly valued, the long-term return of its stock is likely to align with the rate of its business growth. If a stock's price significantly exceeds the GF Value Line, it is considered overvalued, and its future return may be disappointing. Conversely, if it falls significantly below the GF Value Line, its future return is likely to be higher.
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Financial Strength
Investment in companies with weak financial strength could lead to permanent capital loss. It is crucial for investors to review a company’s financial strength before deciding to buy shares. Bank of New York Mellon has a cash-to-debt ratio of 4.04, ranking it lower than 54.5% of companies in the Asset Management industry. Based on this, GuruFocus ranks Bank of New York Mellon’s financial strength as 4 out of 10, suggesting a weak balance sheet.
Profitability
Companies that have been consistently profitable over the long term offer less risk for investors. Bank of New York Mellon has been profitable 10 over the past 10 years. Over the past twelve months, the company had a revenue of $16.5 billion and EPS of $3.16. Its operating margin is 0%, which ranks worse than 0% of companies in the Asset Management industry. Overall, the profitability of Bank of New York Mellon is ranked 6 out of 10, indicating fair profitability.
Growth
Growth is a critical factor in a company's valuation. A faster-growing company creates more value for shareholders, especially if the growth is profitable. The 3-year average annual revenue growth of Bank of New York Mellon is 4.9%, which ranks better than 51.69% of companies in the Asset Management industry. However, the 3-year average EBITDA growth rate is 0%, ranking worse than 0% of companies in the industry.
ROIC vs WACC
The profitability of a company can also be determined by comparing its return on invested capital (ROIC) to the weighted average cost of capital (WACC). Bank of New York Mellon’s ROIC for the past 12 months is 0, and its cost of capital is 10.05. When the ROIC is higher than the WACC, it implies the company is creating value for shareholders.
Conclusion
In conclusion, the stock of Bank of New York Mellon (BK, Financial) is believed to be fairly valued. The company's financial condition is poor, and its profitability is fair. Its growth ranks worse than 0% of companies in the Asset Management industry. To learn more about Bank of New York Mellon stock, you can check out its 30-Year Financials here.
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