Legg Mason (LM:NYS) Fundamental Valuation Report

Fundamental Valuation Report

Legg Mason(LM:NYS)

Financial Services:Asset Management

This Report was generated using the valuation tools available on StockCalc.com. For a free 30 day trial click here.

Close Price/Date
$49.99 (USD) 07/31/2020

Weighted Valuation
$44.84 (USD)

Overall Rating
Overvalued by 10.3%

Valuation Models Adjusted Book Value: $39.29 (USD)
(in order of importance) Comparables: $40.44 (USD)
Multiples: $47.10 (USD)
Valuation Methods This company is:
Cash Flow: Undervalued on a Cash Flow Valuation
Comparable Company: Overvalued on a Comparable Valuation
Asset: Overvalued on an Asset Valuation
According to Analyst consensus at $50.00 this stock is Fairly valued

Company Overview (LM:NYS USD)

Price 49.99
Range 49.99 – 50.00
52 week 34.38 – 50.66
Open 49.99
Vol / Avg. 4.72M/0
Mkt cap 4.45B
P/E 17.73
Div/yield 1.60/0.03
EPS 2.79
Shares 90.56M
Beta 0.73

Company Description

Legg Mason provides investment management services for institutional and individual investors. The firm had $783.4 billion in managed assets at the end of June, spread among its equity (25% of total AUM), fixed-income (57%), alternatives (9%), and money market (9%) investment platforms. Legg Mason uses a multiaffiliate business model, with its single- largest affiliate, Western Asset Management, accounting for more than 60% of managed assets. Other major affiliates include ClearBridge Investments (more than 15% of AUM), Brandywine (less than 10%), and Clarion Partners (less than 10%). The remaining affiliates–Martin Currie, Royce & Associates, EnTrustPermal, QS Investors, and RARE Infrastructure–each account for 2% or less of Legg Mason’s managed assets.

Valuation Details

 We have up to 6 valuation points for each company. Details are at the bottom of the report.

Discounted Cash Flow and Sensitivity Analysis for LM:NYS

Using a discounted cash flow model we generated an intrinsic value of $81.14 (USD) for LM:NYS

Sensitivity Analysis

(showing how changes in the input variables impact the DCF calculation)

LM:NYS Current Values Valuation If Dropped * Valuation If Raised *
Calculated Value: $81.14 1% 5% 1% 5%
WACC (or Ke) 4.85 $108.98 $62.84
Terminal Growth Rate 0.00 $64.52 $106.41
Tax Rate 0.26 $88.06 $74.23
Cash Flow 645,322,510 $75.75 $86.54
Capital Expenditures -39,718,800 $80.83 $81.46
Long Term Debt 2,221,896,000 $82.37 $79.92

* Changes are absolute: ex WACC from 8% to 7%

Comparables Model

Using similar companies and price based ratios we generated a valuation of $40.44 (USD) for LM:NYS. We also generated a valuation of $69.23 (USD) using other metrics and comparables.
The comparable companies were Prospect Capital (PSEC:NAS), SEI Investments (SEIC:NAS), Ares Capital (ARCC:NAS), Northern Trust (NTRS:NAS) and T. Rowe Price Group (TROW:NAS).

Company LM:NYS End Date Value
Earnings/Share $2.82 (USD)
Book Value/Share $42.69 (USD)
Sales/Share $32.66 (USD)
Cash Flow/Share $6.08 (USD)
EBITDA/Share $6.66 (USD)
Price Based on Comps Adjustment Factor (%)
$131.11 (USD) -14.8
$99.01 (USD) -72.9
$139.41 (USD) -88.4
$29.45 (USD) -94.0
$65.26 (USD) 13.5
17.73 PE Ratio 46.49 0.00 16.20 142.60 12.25 14.92
1.17 PB Ratio 2.32 0.62 4.29 0.90 1.56 4.22
1.53 PS Ratio 17.79 50.44 4.61 25.69 3.07 5.12
8.22 PCF Ratio 9.18 4.36 12.90 0.00 6.12 13.36
9.96 EV to EBITDA 9.80 0.00 9.74 0.00 0.00 9.86


Using a multiples approach we generated a valuation of  $47.10 (USD) for LM:NYS

Company LM:NYS End Date Value
Earnings/Share $2.82 (USD)
Book Value/Share $42.69 (USD)
Sales/Share $32.66 (USD)
Cash Flow/Share $6.08 (USD)
EBITDA/Share $6.66 (USD)
Price Based on Comps Adjustment Factor
$42.50 (USD) 0
$37.01 (USD) 0
$40.58 (USD) 0
$44.08 (USD) 0
$71.33 (USD) 0
Ratios Ratio Average
PE Ratio 15.07
PB Ratio 0.87
PS Ratio 1.24
PCF Ratio 7.25
EV to EBITDA 10.71

Adjusted Book Value versus Historical Price to Book

The average the Price to Book ratio for  LM:NYS for the last 10 years was  0.89

We ran the Adjusted Book Value for  LM:NYS and generated a book value of  $44.05 (USD)
By multiplying these we get an adjusted valuation of  $39.29 (USD)

Analyst Data

In the Stockcalc database there are 2 analysts that provide a valuation for LM:NYS. The 2 analysts have a concensus valuation for LM:NYS for 2021 of $50.00 (USD).

LM:NYS Legg Mason

Analyst Recommendation
Buy Hold Sell Rating
(of 5)
Guidance As Of
0 3 0 3.0000 Hold 2020-7-30

Current Price: 49.99 USD

Analyst Consensus
USD Millions 2021 2022
Mean EPS 3.23 3.58
# EPS Analysts 3 3
Mean Revenue 2,806.50 2,862.60
# Revenue Analysts 3 3
Mean Target Price 50.00
Mean Cash Flow 4.45 4.63
Mean EBITDA 566.00 581.00
Mean Net Income 272.70 305.20
Mean Debt Outstanding
Mean Tax Rate
Mean Growth Rate 0.46
Mean Capital Expenditure 44.60 47.40

Explanation of Valuation Models

We have up to 6 valuation points for each company in the database.

The Discounted Cash Flow (DCF) valuation is a cash flow model where cash flow projections are discounted back to the present to calculate value per share. DCF is a common valuation technique especially for companies undergoing irregular cash flows such as resource companies (mining, forestry, oil and gas) going though price cycles or smaller companies about to generate cash flow (junior exploration companies, junior pharma, technology firms…).

The Price Comparables valuation is the result of valuing the company we are looking at on the basis of ratios from selected comparable companies: Price to Earnings, Price to Book, Price to Sales, Price to Cash Flow, Enterprise Value (EV) to EBITDA. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

We have included the Other Comparables as a way to value companies that cannot be valued using Earnings based ratios. This technique is very useful for companies still experiencing negative cash flows such as mining exploration firms. We use Cash/Share, Book Value/Share, MarketCap, 1 Year Return, NetPPE as the ratios here. Each of these ratios for the selected comparable companies are averaged and multiplied by the values for the company we are interested in to calculate a value per share for our selected company.

Multiples are similar to Price comparables where we look at current or historic ratios for the company in question to assess what it should be worth today based on those historic ratios. We use the same 5 ratios as in the price comparables and value the company with its historic averages.

With Adjusted Book Value (ABV) we calculate the book value per share for the company based on its balance sheet and multiply that book value per share by its historical price to book ratio to calculate a value per share.

If we have Analyst coverage for the company we use the consensus target price here.

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