Over the past six months, Lazard’s shares (currently trading at $38.45) have posted a disappointing 19% loss, well below the S&P 500’s 8.2% gain. This was partly driven by its softer quarterly results and may have investors wondering how to approach the situation.
Is now the time to buy Lazard, or should you be careful about including it in your portfolio? See what our analysts have to say in our full research report, it’s free.
Why do we think Lazard will underperform?
Even with the cheaper entry price, we’re passing on Lazard for now. Here are two reasons why there are better opportunities than LAZ, plus one stock we’d rather own.
1. Long-term revenue growth flatter than a pancake
Examining a company’s long-term performance can provide clues about its quality. Any business can have short-term success, but a top-tier one grows for years.
Unfortunately, Lazard struggled to consistently increase demand as its $3.16 billion of revenue for the trailing 12 months was close to its revenue five years ago. This wasn’t a great result and is a sign of poor business quality.
2. EPS trending down
We track the long-term change in earnings per share (EPS) because it highlights whether a company’s growth is profitable.
Sadly for Lazard, its EPS declined by 18.7% annually over the last five years while its revenue was flat. This tells us the company struggled because its fixed cost base made it difficult to adjust to choppy demand.
Final judgment
Lazard falls short of our quality standards. After the recent drawdown, the stock trades at 16.2× forward P/E (or $38.45 per share). At this valuation, there’s a lot of good news priced in - we think there are better stocks to buy right now. Let us point you toward the Amazon and PayPal of Latin America.
Stocks we like more than Lazard
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