This Day On The Street
Continue to site right-arrow
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Lehman Brothers Dons Brokerage Crown

For the full year, revenue at Lehman is expected to rise 25% to $14.5 billion. On a percentage basis, that's higher than the increase at any other big Wall Street firm. Full-year revenue at Goldman Sachs and Merrill Lynch (MER), for instance, are expected to rise 17%. Pulling up the rear is Bear Stearns with a paltry 7% gain in revenue.

"Lehman has done a much better job growing its non-debt-related business. They've improved the equity-side made mergers and acquisition," says Michael Stead, the manager of River Aire Investment, a hedge fund with no position in the stock. "The results are great. You can see the results in the stock price."

The big surge in Lehman's shares has narrowed the historic valuation gap between it and Goldman Sachs, which is still regarded by many as the premier investment house. On the basis of 2006 estimates, shares of Lehman and Goldman Sachs are both trading at 12 times earnings.

The stocks also are comparable on price-to-book ratio, a valuation metric favored by most Wall Street analysts in assessing brokerage stocks. Lehman shares trade at a price/book multiple of 2.25, compared with the 2.35 multiple Goldman garners.

In jumping into the same league as Goldman Sachs, Lehman also has put a good deal of distance between itself and Bear Stearns -- the Wall Street firm with which it is most often compared. Shares of Bear Stearns trade at a price/earnings ratio of just under 11 on the basis of next year's earnings. On a price-to-book basis, Bear Stearns fares even worse, trading at a lowly multiple of 1.73.

But for all its big gains in 2005, it looks as though investors won't be able to bank on a repeat performance from Lehman in 2006. Analysts are looking for its earnings to be largely unchanged in the coming year. Revenue is expected to rise a scant 4%.

However, Lehman will not be alone.

2 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!

Markets

DOW 18,030.21 +6.04 0.03%
S&P 500 2,081.88 -0.29 -0.01%
NASDAQ 4,773.4720 +8.0480 0.17%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs