Q: Hi - what do you think of DOL valuation after recent run up post earnings? Still room to go...or reaching the top end of reasonable range?
5i Research Answer:
DOL is trading at 32.2x forward earnings which is certainly expensive for a defensive stock and at the higher end of its historical 10-yea range (it has been higher on occasion). Revenue growth forecast is mid single digits while EPS growth is expected to be in the low double digits. It has done a great job of creating shareholder value historically and expanding the bottom line. Given the current economic conditions there is certainly still room to grow, we think. The valuation is not cheap, but we view it as a very high quality name and investors have to pay for this. New buyers could start small, as it certainly could consolidate after its 43% YTD gain.