Franklin Templeton has delivered a strong multi year share price run, and the question now is whether the returns it earns on its capital are enough to support where the stock trades today.
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Over the past 3 years the stock has gained 61.4%, which puts the spotlight on whether that kind of share performance lines up with the returns the business is generating on the money it invests.
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Recent moves to launch equity ETFs with embedded Bitcoin exposure and to expand asset backed finance through Benefit Street Partners can influence how effectively Franklin Templeton puts capital to work and how variable those returns may be across cycles.
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Prefer to judge Franklin Templeton on earnings? See why Franklin Templeton's 20.7x P/E tells a different valuation story .
The issue now is whether the current share price fairly reflects the returns Franklin Templeton is earning on its capital and the pattern of those returns over time.
If you want more ideas built around how effectively capital is being put to work, a focused stock screen is a useful next step, starting with 29 high quality undervalued stocks .
Does Franklin Templeton Look Undervalued on Excess Returns?
The Excess Returns model looks at how much profit Franklin Templeton can earn above its equity cost and what that is worth over time. In this framework, the Book Value is $23.13 per share, compared with a Stable Book Value estimate of $26.53 per share, and a Stable EPS of $3.22 per share based on analyst views of future return on equity. The implied Cost of Equity is $2.21 per share and the resulting Excess Return is $1.00 per share, supported by an Average Return on Equity of 12.12%.
This setup suggests Franklin Templeton is modeled as a business that can regularly earn more on its equity base than investors require, which can support a valuation above the current share price of $30.99. The recent filing for equity ETFs with embedded Bitcoin exposure helps explain why the market may be cautious about how consistent those excess returns will be through different market conditions, even though the Excess Returns model currently places Franklin Templeton's estimated intrinsic value substantially above the current share price. Find out what Franklin Templeton could be worth using our Excess Returns estimate .
The Franklin Templeton Narrative: What Would Justify Today's Price?
Franklin Templeton Narratives pick up where the valuation puzzle leaves off by explaining which assumptions on growth, margins and earnings would need to hold for the stock to be worth materially more or less than today's price, and they sit on Simply Wall St's Community page. Each one sets out Franklin Templeton's implied fair value as a thesis about the business that you can revisit over time, rather than a one off snapshot.
Bulls and bears on Franklin Templeton are looking at the same fee engine and drawing very different conclusions about how much is already priced in.
Bull case: 13% 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 13% undervalued .
Bear case: 12% overvalued
"Although Franklin Templeton reports record alternatives fundraising and a large base of fee generating private markets assets, rising revenue sharing and platform fee demands on newer vehicles like ETFs and SMAs could start to spill over into private markets distribution, which would limit the effective fee rate and keep revenue from scaling in line with assets under management…"
Explore why this Narrative puts Franklin Templeton at 12% overvalued .
Franklin Templeton's valuation still leaves one crucial angle unexplored
Pricing Franklin Templeton is only part of the story. The people allocating your capital, how they are chosen and what they are rewarded for can tilt long term outcomes in ways the share price alone will not show. See who runs Franklin Templeton and how they are paid .
This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
Companies discussed in this article include BEN .
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