Over the past six months, Northern Trust has been a great trade, beating the S&P 500 by 14.4%. Its stock price has climbed to $176.96, representing a healthy 22.9% increase. This was partly thanks to its solid quarterly results, and the run-up might have investors contemplating their next move.

Is now still a good time to buy NTRS? Or is this a case of a company fueled by heightened investor enthusiasm? Find out in our full research report, it’s free.

Why Does Northern Trust Spark Debate?

Founded in 1889 during Chicago's post-Great Fire rebuilding boom, Northern Trust (NASDAQ: NTRS) provides wealth management, asset servicing, and banking solutions to corporations, institutions, families, and high-net-worth individuals globally.

Two Positive Attributes:

1. EPS Moving Up Steadily

Analyzing the long-term change in earnings per share (EPS) shows whether a company’s incremental sales were profitable — for example, revenue could be inflated through excessive spending on advertising and promotions.

Northern Trust’s EPS grew at 10.7% compounded annual growth rate over the last five years, higher than its 6.5% annualized revenue growth. This tells us the company became more profitable on a per-share basis as it expanded.

2. Market-Beating ROE Showcases Attractive Growth Opportunities

Return on equity, or ROE, tells us how much profit a company generates for each dollar of shareholder equity, a key funding source for financial firms. Over a long period, financial firms with high ROE tend to compound shareholder wealth faster through retained earnings, buybacks, and dividends.

Over the last five years, Northern Trust has averaged an ROE of 13%, healthy for a company operating in a sector where the average shakes out around 10% and those putting up 25%+ are greatly admired. This shows Northern Trust has a decent competitive moat.

One Reason to Be Careful:

Long-Term Revenue Growth Disappoints

A company’s long-term performance is an indicator of its overall quality. Any business can have short-term success, but a top-tier one grows for years.

Unfortunately, Northern Trust’s 6.5% annualized revenue growth over the last five years was mediocre. This wasn’t a great result compared to the rest of the financials sector, but there are still things to like about Northern Trust.

Final Judgment

Northern Trust has huge potential even though it has some open questions, and with its shares topping the market in recent months, the stock trades at 16.1× forward P/E (or $176.96 per share). Is now a good time to buy? See for yourself in our comprehensive research report, it’s free.

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