The Fifteen Most Overvalue Stocks: Franklin Resources

By Douglas A. McIntyre Published Nov 20, 1:16PM EST

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In looking for the most overvalued stocks, we considered metrics like price-to-sales, rapid stock price appreciation not supported by comparable financial growth, pricing and revenue pressure from competition, and future predictions of success like forward P/E. All of the stocks that we examined are large caps, and we have made an attempt to look across as many industries as possible.

Franklin Resources. (BEN) The large mutual fund and institutional investing firm trades at about $109, near its 52-week high. This is up from $29 in October 2003. The company currently has a price-to-sales ratio of 5.66 Janus Capital’s price-to-sales is 4.0. Legg Mason trades at 3.3 times.

In it most recent quarter, growth in revenue and assets under management slowed from the immediately previous quarter. The stock is actually down from the day of the earnings announcement on October 26. Assets under management grew 3% in October to $526.8 billion.

Franklin’s shares were recently downgraded by Prudential from "overweight" to "neutral" on growth and valuation concerns. Like almost all firms in the financial services sector, especially those in the consumer segment, Franklin has risk of both a drop in the stock market and any slowdown in asset growth due to a slumping economy and housing sector.

Morningstar’s "fair value estimate" for Franklin’s stock is only $77.

Douglas A. McIntyre can be reached at [email protected]. He does not own securities in companies that he writes about.

About the Author Douglas A. McIntyre →

Douglas A. McIntyre is the co-founder, chief executive officer and editor in chief of 24/7 Wall St. and 24/7 Tempo. He has held these jobs since 2006.

McIntyre has written thousands of articles for 24/7 Wall St. He is an expert on corporate finance, the automotive industry, media companies and international finance. He has edited articles on national demographics, sports, personal income and travel.

His work has been quoted or mentioned in The New York Times, The Wall Street Journal, Los Angeles Times, The Washington Post, NBC News, Time, The New Yorker, HuffPost USA Today, Business Insider, Yahoo, AOL, MarketWatch, The Atlantic, Bloomberg, New York Post, Chicago Tribune, Forbes, The Guardian and many other major publications. McIntyre has been a guest on CNBC, the BBC and television and radio stations across the country.

A magna cum laude graduate of Harvard College, McIntyre also was president of The Harvard Advocate. Founded in 1866, the Advocate is the oldest college publication in the United States.

TheStreet.com, Comps.com and Edgar Online are some of the public companies for which McIntyre served on the board of directors. He was a Vicinity Corporation board member when the company was sold to Microsoft in 2002. He served on the audit committees of some of these companies.

McIntyre has been the CEO of FutureSource, a provider of trading terminals and news to commodities and futures traders. He was president of Switchboard, the online phone directory company. He served as chairman and CEO of On2 Technologies, the video compression company that provided video compression software for Adobe’s Flash. Google bought On2 in 2009.