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TFS Financial (TFSL) has drawn fresh attention after recent share price moves, with the stock showing mixed short term returns along with stronger performance over the past year and the past 3 months.
See our latest analysis for TFS Financial.
The recent 1 month share price return of 5.51% and 3 month share price return of 10.18%, alongside a 1 year total shareholder return of 18.62%, point to building momentum rather than a short lived move at the current US$14.93 level.
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With TFS Financial trading close to its analyst price target and an intrinsic value estimate that suggests a premium rather than a discount, you have to ask: is there still a buying opportunity here, or is the market already pricing in future growth?
On a simple numbers check, TFS Financial looks expensive, with a P/E of 46.6x at the current $14.93 share price compared with several benchmarks that sit much lower.
The P/E ratio tells you how much investors are paying today for each dollar of current earnings, which is especially watched for banks where earnings and balance sheet quality tend to move together. For TFSL, that 46.6x figure stands well above its estimated fair P/E of 11.8x, which implies the market price is well ahead of the level our fair ratio suggests could be more in line with fundamentals.
It is not just the modelled fair ratio that looks lower. TFSL’s P/E is also higher than the US Banks industry average of 11.9x and the peer average of 14.9x, which points to investors assigning a much richer earnings multiple than both the sector and similar companies. If market sentiment toward the stock cools, the P/E has room to compress toward those lower reference points rather than the other way round.
Explore the SWS fair ratio for TFS Financial
Result: Price-to-Earnings of 46.6x (OVERVALUED)
However, if earnings soften or sentiment toward richly valued bank stocks cools, that 46.6x P/E and premium to intrinsic value could quickly come under pressure.
Find out about the key risks to this TFS Financial narrative.
While the P/E points to a rich price, our DCF model goes even further. On this view, TFSL at $14.93 is trading well above an estimated future cash flow value of $1.29, which frames the current price as expensive rather than cheap. So which signal should carry more weight?
