We previously published our investment research report series recommending State Street Corporation (STT). We were pleased to see that the company was able to show progress in reducing its cost base and believe that once the market sees less volatility, then the company will begin to enjoy top line growth. We also believe that the company is simply too cheap when we consider its valuation metrics:

  • STT’s PE of 11X trailing earnings and 10.6X estimated 2012 EPS
  • STT’s PE based on FY 2013 EPS is 9.1X
  • STT is trading at a 1% discount to book in spite of its strong ability to generate cash

We would have strongly preferred to see top line revenue growth on a linked quarter and year-over-year basis, however due to the challenging macroeconomic environment; we noticed that other firms have seen revenue come in flat or lower than expectations. We can take comfort in the fact that while State Street’s year-over-year revenue declined by 2.7%, at least it didn’t see the 6% year-over-year decline that Bank of New York Mellon (BK) had.

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