Financial institutions play a critical role, offering everything from consumer banking to wealth management and specialized financial solutions. Still, investors are uneasy as companies face challenges from an unpredictable interest rate and inflation environment. These doubts have caused the industry to lag recently as financials stocks have collectively shed 8.8% over the past six months. This performance was worse than the S&P 500’s 2.8% fall.

The elite companies can churn out earnings growth under any circumstance, however, and our mission at StockStory is to help you find them. Keeping that in mind, here are two financials stocks we think can generate sustainable market-beating returns and one best left ignored.

One Financials Stock to Sell:

State Street (STT)

Market Cap: $35.75 billion

Dating back to 1792 when Boston's Long Wharf was the center of global shipping and trade, State Street (NYSE: STT) provides custody, investment management, and other financial services to institutional investors like pension funds, asset managers, and central banks worldwide.

Why Is STT Not Exciting?

1. Scale is a double-edged sword because it limits the company’s growth potential compared to its smaller competitors, as reflected in its below-average annual revenue increases of 3.6% for the last five years
2. Earnings growth over the last five years fell short of the peer group average as its EPS only increased by 9.1% annually

State Street is trading at $128.22 per share, or 10.7x forward P/E. Dive into our free research report to see why there are better opportunities than STT.

Two Financials Stocks to Watch:

Raymond James (RJF)

Market Cap: $28.26 billion

Founded in 1962 and headquartered in St. Petersburg, Florida, Raymond James Financial (NYSE: RJF) is a diversified financial services company that provides wealth management, investment banking, asset management, and banking services to individuals and institutions.

Why Are We Positive On RJF?

1. Solid 11.7% annual revenue growth over the last five years indicates its offering’s solve complex business issues
2. Performance over the past five years was boosted by share buybacks, which enabled its earnings per share to grow faster than its revenue
3. ROE punches in at 17.9%, illustrating management’s expertise in identifying profitable investments

Raymond James’s stock price of $143.40 implies a valuation ratio of 11.7x forward P/E. Is now the right time to buy? See for yourself in our in-depth research report, it’s free.

Evercore (EVR)

Market Cap: $11.93 billion

Founded in 1995 as a boutique advisory firm focused on independence and client trust, Evercore (NYSE: EVR) is an independent investment banking firm that provides strategic advisory, capital markets, and wealth management services to corporations, financial sponsors, and high-net-worth individuals.

Why Do We Love EVR?

1. Impressive 25.9% annual revenue growth over the last two years indicates it’s winning market share this cycle
2. Incremental sales over the last two years have been highly profitable as its earnings per share increased by 50.2% annually, topping its revenue gains
3. Stellar return on equity showcases management’s ability to surface highly profitable business ventures

At $311.26 per share, Evercore trades at 16.3x forward P/E. Is now a good time to buy? Find out in our full research report, it’s free.

High-Quality Stocks for All Market Conditions

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