20% off! Major traders are giving this FTSE 100 financial giant a run for its money

They did not quarrel FTSE 100 investment giant This is St James’s area (LSE: STJ) is making a spectacular comeback – and it’s going to get noticed. Two of the UK’s biggest investment banks have given the stock an overweight rating over the past few days. Both Barclays again JP Morgan He thinks things will only get better from here.

Shares of the London-based financial giant have fallen 20% in the past year but recently, things have been on the upswing. Since its 10-year low on April 16th, the stock has recovered a whopping 74.6%!

Not all people are so optimistic. Four investment managers have open short positions in the stock, including Marshall Wace and Millennium International.

So let’s take a look at the company’s literature and find out if it’s worth considering.

First, how did it get here?

St James’s Place is the UK’s largest provider of financial advice, serving the country’s 960,000 wealthiest citizens. So I would think it’s a shame when a company’s own stock is struggling.

The last two and a half years have not been kind with the price falling to £7 from a high of £16.83 at the end of 2021. At its lowest point in April, it fell by 75%.

New consumer protection rules introduced by the Financial Conduct Authority last year caught the company by surprise. Suddenly, its very high cost structure is no longer considered acceptable.

Lack of transparency was also noted as a negative factor. Combine this with the increasingly popular robo-advisors and index-linked funds and suddenly the company’s entire business model is at risk.

Regulatory changes have raised questions about the company’s compliance and it has set aside £426m in refunds for potential customers. Subsequent changes to the pay structure meant revenues fell to £700m from £2bn the previous year, hurting the share price.

But a program of repurchasing, restructuring and sharing has put things back on track.

So is it headed for success?

Let’s take a look

St James’s Place’s balance sheet looks clean. With half a billion in debt, £1bn in equity and around £6bn in cash, it’s very strong. And with a market capitalization of £3.8bn offset by £26.8bn in sales, its price-to-sales ratio (P/S) is small, at 0.1 times.

Earlier this year it was unprofitable, with earnings per share (EPS) falling to a loss of 1.8p a share. But now it’s back in the game with record £181.9bn in assets under management. In the latest first quarter earnings results released last month, revenue increased and revenue grew 2.2%. Profit margins are down to 1% from 2% because of all the costs related to the law but other than that, they are doing well.

The recent success can be attributed to a £100m cost-cutting exercise and a £32.9m share buyback plan announced in August. But chief executive Mark Fitzpatrick says the company still has a lot of hard work to do in the next 24 months. The long-term effects of the cost cuts are yet to materialize and may weigh on the share price.

Overall, the recovery is amazing. There are still risks but with 3% more customers this year, people seem happy with the changes.

It may come back stronger than ever. I like its chances, so I plan to buy shares as soon as I get free money this month.