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Franklin Templeton (BEN) Stock Could Be A Bargain After A 56% Run

Simply Wall St · 2d ago

Franklin Templeton has delivered a 55.7% share price gain over the past three years, which puts a spotlight on a simple question for investors: Is the current valuation really backed by the returns the asset manager earns on the capital it deploys across its funds and business lines?

  • The 55.7% move over three years raises the question of whether Franklin Templeton's recent share price performance is fully supported by the returns it generates on its capital base.
  • Recent initiatives such as the blockchain pilot with Uber and HSBC, the ChinaAMC collaboration, and the launch of equity plus Bitcoin ETFs may support expectations for how effectively Franklin Templeton can put new capital to work and recycle it into cash flows.
  • Prefer to judge Franklin Templeton on earnings? See why Franklin Templeton's 21.2x P/E tells a different valuation story.

The stock's next move may depend on whether the returns Franklin Templeton earns on its capital are strong enough to justify where the shares trade today.

If you are comparing Franklin Templeton's recent 55.7% three year return with other ways companies deploy investor capital, it can help to line it up against 33 high quality undervalued stocks.

Does Franklin Templeton Look Undervalued on Excess Returns?

The Excess Returns model looks at how profit on equity compares with the cost of that equity and what that gap implies for Franklin Templeton’s valuation. It asks whether the firm is consistently earning more on its capital than shareholders require.

On the current inputs, Franklin Templeton is modeled with book value of $23.13 per share and a stable book value of $26.59 per share, paired with stable EPS of $3.23 per share. The cost of equity is set at $2.21 per share, which leaves an excess return of $1.02 per share and an average return on equity of 12.14%. Those numbers point to a business that is expected to generate returns above its equity charge, with the Excess Returns projections putting the estimated intrinsic value substantially above the current $31.64 share price.

Uber’s blockchain pilot using Franklin Templeton’s tokenized money market fund helps explain why the model assumes the manager can keep reinvesting capital at these returns, even as the market still prices the shares at $31.64. To see how that compares with the model’s view of intrinsic worth, check the detailed Excess Returns output. Find out what Franklin Templeton could be worth using our Excess Returns estimate.

The Franklin Templeton Narrative: What Would Justify Today's Price?

Narratives pick up where the Franklin Templeton valuation puzzle leaves off by explaining which paths for future growth, margins and earnings would need to occur for the stock to be worth materially more or less than today’s price. Instead of a single output from a ratio or model, they unpack the future conditions that number depends on so you can follow whether those assumptions actually show up. Narratives appear on Simply Wall St’s Community page.

Franklin Templeton followers are split between those who see a stronger mix story playing out and those who worry fee sharing keeps more of the upside with distributors.

Bull case: 11% undervalued

"Franklin Templeton is expanding its presence in non US and emerging markets, with previously disclosed AUM of around 500b outside the US now complemented by new private markets capital formation such as the 1.5b Collateralized Fund Obligation that provides broader access to its private strategies..."

Discover why this Narrative puts Franklin Templeton at 11% undervalued.

Bear case: 14% overvalued

"Bearish analysts expect Franklin Templeton to face ongoing fee and distribution pressure as platforms seek more economics from products such as ETFs and SMAs, which could weigh on revenue growth and long-term earnings power..."

Explore why this Narrative puts Franklin Templeton at 14% overvalued.

One more Franklin Templeton check sits beside the share price

Price, returns and models only tell part of the Franklin Templeton story, because the people directing capital and how they are rewarded can heavily shape what happens next for shareholders. See who runs Franklin Templeton and how they are paid.