On the four Ms, Northern Trust earns 67 for management and 64 for moat. The management score rests on a return on invested capital of 5.0% and a gross margin of 56.5% — figures that describe a business earning a respectable return on what it employs. Debt sits at 1.27x equity.
The valuation runs on assumptions chosen to understate rather than flatter. Growth is modelled at 15.0% a year, below the 18.0% actually measured over the last decade — the model caps growth rather than extrapolating a good run forwards. The exit multiple assumed is 16.7x. That produces an intrinsic value of $194.62, a 10-CAP price of $13.55 and a payback time price of $21.39, with the value zone set at the highest of the three, $97.31. Today's price of $169.20 is 74% above it.
The price is above the value zone and the business scores 64 for moat and 67 for management. Neither test argues for paying up here.
| Price | $169.20 |
| Market cap | $31.0B |
| P/E ratio | 14.5x |
| Return on invested capital | 5.0% |
| Gross margin | 56.5% |
| Debt to equity | 1.27x |
| Free cash flow yield | 21.3% |
| Growth rate used | 15.0% |
| Growth rate measured | 18.0% |
| Exit multiple assumed | 16.7x |
| Company | Moat | Buy price |
| Raymond James Financial (RJF) | 75 | $182.85 |
| Principal Financial Group (PFG) | 33 | $224.06 |
| Ares Management Corporation (ARES) | 81 | $59.92 |
| T. Rowe Price (TROW) | 41 | $103.38 |
Every number above is built on assumptions that can be changed. In Moatly you can move the growth rate, the exit multiple and the margin of safety and watch every figure recalculate, so you are testing your own view of Northern Trust rather than accepting ours.