Is the Macquarie Group Ltd (ASX: MQG) share price a buy?
I think Macquarie could be one of the best financials businesses on the ASX. I certainly think it looks better value today then it did a month ago – its share price has fallen over 10%.
The reason for the fall was the release of Macquarie's FY19 result. As expected, the numbers were impressive with FY19 earnings per share (EPS) up by 17% to $8.83 and assets under management (AUM) went up by 11% to $551.3 billion.
However, the report also came with an outlook update for FY20 which said that the overall group result was expected to be slightly down on FY19. One element of the guidance was that investment-related income in FY20 is expected to be down given the material transactions in FY19.
However, I think the fall in the share price reflects the somewhat subdued short-term outlook and makes Macquarie worth a look.
I think Macquarie has a number of advantages over local large banks like Commonwealth Bank of Australia (ASX: CBA) and Westpac Banking Corp (ASX: WBC) as an investment.
It has broader pillars of earnings with Macquarie Asset Management, Corporate & Asset Finance, Banking and Financial Services, Commodities & Global Markets and Macquarie Capital. Compare this to largely just loan earnings from the big four ASX banks.
Macquarie also generates a large amount of international income with around two thirds of income generated overseas. Most of the big ASX bank income comes from Australia and New Zealand.
Having earnings flexibility also means Macquarie can invest more capital into whichever region it thinks is the best opportunity at the time.
Doesn't all of that sound better for the long-term than just giving out mortgages?
Foolish takeaway
Macquarie is currently trading at 13x FY21's estimated earnings. Assuming the world doesn't go through a recession, I think Macquarie is a solid option for the medium-term at the current price, particularly with its partially franked dividend yield of 4.8%.
