OPPENHEIMER HOLDINGS INC (OPY) stock intrinsic value fair value estimate & owner earnings analysis

Oppenheimer Holdings is a New York-based brokerage, wealth manager and investment bank. At the end of 2025 it had 924 financial advisors in 88 offices across 25 states and $55.2 billion of client assets in fee-based programs, alongside investment banking, trading and institutional sales, with smaller offices in London, Jersey, Geneva, Tel Aviv and Hong Kong. Its earnings swing widely with markets. Profit per diluted share was $(0.09) in 2016, $1.67 in 2017, $2.05 in 2018, $3.82 in 2019, $9.30 in 2020, $11.70 in 2021, $2.57 in 2022, $2.59 in 2023, $6.37 in 2024 and a record $13.04 in 2025. HOW WE MEASURED EARNINGS. For a securities firm, operating cash flow mostly reflects changes in trading inventory and customer balances (it was -$18.8 million in 2023, -$108.2 million in 2024 and +$188.8 million in 2025, against net income of $30.2 million, $71.6 million and $148.4 million), so we use net income per diluted share, which already deducts stock compensation. Borrowing is the raw material of a brokerage, so no debt is subtracted from any case. The company redeemed its $113 million of senior secured notes in 2024 and its year-end 2025 balance sheet shows no long-term debt; it does use short-term bank call loans to finance customer and trading balances ($77 million at year-end 2025 and $350 million at June 30, 2026). Diluted shares (11.4 million in 2025) include unvested restricted stock. NORMAL EARNINGS: $7.84 A SHARE. We use the median of 2020 to 2025 ($2.57, $2.59, $6.37, $9.30, $11.70, $13.04). Revenue stepped up to about $1.2 billion in 2020 and has not been below $1.1 billion since, whereas 2018 and 2019 revenue was about $1.0 billion, so the earlier years describe a smaller firm. The window holds two boom years (2020 and 2021), a two-year slump (2022 and 2023) and a recovery (2024 and 2025). Record 2025 profit of $13.04 sits well above this level: investment banking revenue was $266 million (against $118 million in 2023) and some sponsored hedge funds passed their high-water marks, producing large incentive fees. We do not treat that as normal. RECENT RESULTS. First-half 2026 revenue was $900 million, 21% above the first half of 2025, but first-half profit was only $0.60 per share. In the first quarter the firm booked a $70 million charge to settle the class action over its cash-sweep program (a loss of $1.93 per share for the quarter), and the second quarter earned $2.38 per share against $1.91 a year earlier. Compensation rose to 67% of revenue in the first half of 2026 from 63% a year earlier, partly because of $22.3 million of first-quarter expense on advisor stock appreciation rights, whose cost rises with the share price. Bank deposit sweep income, which the firm earns on client cash swept into partner banks, was $172.8 million in 2023, $138.8 million in 2024 and $114.8 million in 2025, and $51.1 million in the first half of 2026 against $58.7 million a year earlier. These quarters do not move our normal-earnings level; they inform the cost and sweep assumptions below. CHANGE SINCE OUR LAST ESTIMATE. The 2025 annual report disclosed up to $253 million of possible additional losses on certain legal matters and gave no estimate for the cash-sweep class action, which had been certified as a class in December 2025. That class action was settled in April 2026 for $70 million, which removes the largest open item. The June 2026 quarterly data shows a disclosed range of possible additional loss of only about $3 million beyond amounts accrued; we could not reconcile that large drop from the annual report's $253 million using the filings available, so we do not rely on it and treat legal risk as still present. Our earlier values were built on a different basis and are not comparable with those below. GROWTH CREDITED. In 2025 owner earnings per share grew 105% (from $6.37 to $13.04). Year 1 of the base case assumes $7.84, below 2025, so no reversal of a slowdown is needed. Growth is then credited at 3% a year in years 2 to 6 and 2% in years 7 to 10. The evidence: shareholders' equity grew from $593 million at the end of 2019 to $984 million at the end of 2025 (about 8.8% a year) and revenue grew about 8% a year from 2018 to 2025, including through the 2022 revenue decline of about 20%, while the diluted share count fell from 13.9 million to 11.4 million. The firm states it is focused on growing wealth management through additions of experienced financial advisors in its existing branch system. We credit well under the demonstrated rate because much of the past growth came from rising markets. We leave out market-driven asset gains, new products, further investment banking share gains and margin expansion. After year 10 earnings simply continue at the year-10 level with no further growth: the support is a base of 924 advisors and $55.2 billion of fee-based assets producing $555 million of advisory fees in 2025, and profitable years in nine of the last ten. BEAR CASE: $47.50 PER SHARE. The story replays the weakest stretches in the firm's own record. The next year earns $3.00 as a downturn begins; then two years at $2.60, the 2022 to 2023 pattern, when investment banking revenue fell 71% (from $436 million in 2021 to $128 million in 2022) and profit fell from $11.70 to about $2.60; recovery to a lower normal of $4.00 for four years; a second trough at $2.00 in years 8 and 9 (profit was $1.67 and $2.05 in 2017 and 2018); $4.00 in year 10; and the ten-year average of $3.22 thereafter. That business is worth about $53.60 a share. It has no long-term debt to subtract, and we deduct the full $70 million settlement with no tax benefit ($6.15 a share), leaving $47.50. This is below tangible book value of about $71 a share because $3 to $4 of earnings is only roughly a 4% to 6% return on that capital. We do not model credit losses on customer receivables of $1.4 billion (the allowance for credit losses on them was $131 thousand at year-end 2025), nor a sudden market gap. BASE CASE: $151.50 PER SHARE. Earnings of $7.84 in year 1 growing as described above, then continuing flat. The first ten years are worth about $64.70 a share and the continuation about $91.60, for a business value of about $156.20. There is no long-term debt; the one known liability is the $70 million settlement, about $4.70 a share assuming it is tax-deductible at roughly the company's 24% rate. The difference is $151.50. Book value is about $86 a share ($984 million of shareholders' equity) and tangible book value about $71. BULL CASE: $219.40 PER SHARE. The investment banking build-out holds: revenue from that business rose from $118 million in 2023 to $176 million in 2024 and $266 million in 2025, and advisory fees grew 14.9% in 2025. Normal earnings are $10.50 (below 2025's $13.04 and 2021's $11.70), growing 4% a year in years 2 to 6 and 3% in years 7 to 10, then flat. Business value is about $224.10 a share, with no long-term debt, less $4.70 for the settlement, which leaves $219.40. TESTING THE CASE. A load-bearing question is whether normal earnings depend on sweep income, which has fallen from its 2023 peak. They do not appear to: sweep income was only $15.6 million in 2021, when profit was $11.70 on $436 million of investment banking revenue, and it was a record $172.8 million in 2023, when profit was only $2.59 on $118 million of investment banking revenue. Within our window, the large swings track investment banking and capital markets activity more than sweep income. The remaining pressure is on costs: compensation as a share of revenue rose in 2026, partly through stock appreciation rights that are expensed when the share price rises. HOW WE ARRIVED AT THE MARGIN-OF-SAFETY PRICE: $50. Our confidence in the earnings level is moderate. Annual profit ranged from a $0.09 loss to $13.04 a share in ten years, so we cannot be sure whether $3 or $10 is the right run rate; what we are more sure of is the balance sheet: no long-term debt, assets that are largely securities carried at fair value and receivables from customers and other brokers, and shareholders' equity that grew from $593 million at the end of 2019 to $984 million, with only a small dip in 2022. The worst plausible outcomes are a violent market gap or a run on advisors and clients, a rule change or further litigation that cuts what the firm may earn on swept cash, and a prolonged slump in deal activity like 2022 and 2023. The firm has total assets near $3.7 billion on $984 million of equity and relies on repurchase agreements ($997 million) and call loans for funding, so a severe gap in securities prices would hurt, but it stayed profitable through the 2022 and 2023 slump. An entity controlled by chairman Albert Lowenthal holds about 98% of the 99,665 voting Class B shares, and the Class A shares have no vote, so outside shareholders depend on the controlling holder's judgment on capital; the firm declared a $1.00 special dividend payable January 9, 2026 and raised its quarterly dividend from $0.18 to $0.20 in the second quarter of 2026. If we are wrong about the earnings level and the bear case plays out, the shares are worth about $47.50; if sweep income drops another $40 million, that costs roughly $2.70 a share after tax. The price assumes a three-to-four-year holding period. During that period, the business pays a dividend of about $0.80 a year and, at median earnings of $7.84, should add roughly $7 a share of retained earnings to book value each year. At $50 a share, median earnings would be a yield of about 16%, the price would sit about 30% below tangible book value, and a 20% annual return over three years needs the shares to reach about $84 once about $2.40 of dividends is counted, which is below today's book value per share of about $86 and well below where retained earnings should take it if earnings are near the median. At a higher price the margin for the 2022-to-2023 style slump and the loss of sweep income would be too thin. LIMITS. Second-quarter 2026 figures come from the company's financial data tables and first-quarter earnings release; we did not read the full text of its June 2026 quarterly filing, so the settlement's payment timing and court approval status are not confirmed here.