StoneX Group Inc. Primed for Cash Flow Boost from “One Big Beautiful Bill’s” Tax Incentives

NEW YORK, NY – July 24, 2025 – StoneX Group Inc. (NASDAQ: SNEX), a global leader in financial services encompassing execution, clearing, and risk management across diverse asset classes, today heralded the completion of its landmark acquisition of R.J. O’Brien & Associates LLC (RJO). This transformative merger, effective as of July 24, 2025, strategically integrates RJO, the venerable institution founded in 1914 as the oldest independent futures brokerage in the United States, into StoneX’s expansive global network. This union not only solidifies StoneX’s already formidable market position but also sets the stage for a significant acceleration in cash flow, further bolstered by the recently enacted “One Big Beautiful Bill Act” (OBBBA) and its robust pro-business tax incentives.

The closing price for StoneX Group Inc. shares today stands at a robust $94.96, reflecting investor confidence in the combined entity’s enhanced capabilities and future prospects. This strategic consolidation is poised to unlock substantial synergies, with management forecasting over $50 million in annual expense savings, at least $50 million in capital efficiencies, and significant revenue opportunities stemming from cross-selling initiatives across OTC derivatives, physical commodity trading, and fixed income products. StoneX remains a Screaming Buy.

A Convergence of Strengths: Building a Derivatives Behemoth

The $900 million equity value transaction for RJO was meticulously structured, comprising $625 million in cash and approximately 3.5 million shares of StoneX common stock. Additionally, StoneX assumed up to $143 million of RJO’s existing debt. The cash component of the acquisition was financed through the issuance of $625 million in long-term senior secured notes, demonstrating StoneX’s strategic financial engineering to support this pivotal expansion.

The merger instantly augments StoneX’s already impressive client base by over 75,000, propelling the combined entity’s client float to a staggering $13 billion – an increase of nearly $6 billion. This expanded client float represents a substantial enhancement to StoneX’s interest-earning asset base, promising a material boost to net interest income in the current interest rate environment. Furthermore, the acquisition is expected to boost annual cleared listed derivatives volume by approximately 190 million contracts, solidifying StoneX’s position as a dominant force in the global derivatives landscape.

RJO’s robust financial performance in calendar year 2024, reporting $766 million in revenue and approximately $170 million in EBITDA, seamlessly complements StoneX’s operations. This integration is expected to lead to enhanced margins, earnings per share (EPS), and return on equity (ROE) for the combined entity, aligning perfectly with management’s ambitious growth forecasts.

Quantitative Foundations: A Track Record of Growth and Accretion

StoneX Group Inc. has demonstrated a compelling trajectory of quantitative performance, with historical pro-forma adjustments reflecting the highly accretive nature of this merger. The company reported impressive revenues of $123.035 billion in fiscal 2024 (which concluded on September 30, 2024), a significant increase from $99.888 billion in fiscal 2023. This remarkable growth translates to a five-year Compound Annual Growth Rate (CAGR) of approximately 30.4%, underscoring StoneX’s consistent ability to expand its top line.

Net income attributable to common shareholders also exhibited robust growth, reaching $295.4 million in fiscal 2024, with a five-year CAGR of about 26.2%. When incorporating RJO’s contributions and projected synergies, and accounting for the additional interest expenses incurred from the acquisition financing, the estimated combined net income approximates a formidable $417 million. This pro-forma figure eloquently illustrates the immediate value creation generated by the merger, promising substantial benefits for shareholders.

The company’s financial margins, while characteristic of a high-volume brokerage model, remain healthy. The trailing twelve-month (TTM) gross profit margin stands at 1.81%, translating to $2.224 billion in gross profit on $123.035 billion in revenue. The net profit margin is 0.24%, while the operating margin is 1.39% TTM, with operating income at $1.712 billion.

On the balance sheet front, StoneX maintained total assets of $27.466 billion as of September 30, 2024, with shareholders’ equity of $1.709 billion. Book value per share stood at $35.75. Pro-forma for the merger, shares outstanding are expected to increase to approximately 52.42 million, with the equity base enhancing by the value of issued shares. Total debt, which was $11.316 billion, is projected to rise pro-forma to about $12.084 billion following the added financing and assumed RJO debt, resulting in an adjusted debt-to-equity ratio of approximately 7.07 (up from 6.62).

Cash flow dynamics, while inherently variable in the financial services sector due to working capital fluctuations, remain a focal point. TTM operating cash flow was -$1.062 billion and free cash flow stood at -$1.126 billion. However, it is crucial to note that the business model is characterized by low reinvestment needs, with capital expenditures being modest at -$64 million TTM. This low CapEx requirement affirms the business’s ability to generate significant free cash flow for allocation to shareholders or future growth initiatives, without heavy reliance on capital-intensive investments. StoneX’s policy of prioritizing growth and acquisitions is reflected in its 0% dividend payout ratio. Share dilution trends show a three-year average increase of approximately 2.2%, a figure that will be accelerated by the 3.5 million shares issued as part of the RJO merger.

The trailing 12-month Return on Equity (ROE) of 17.25% demonstrates StoneX’s effective utilization of equity to generate profits. Similarly, the trailing 12-month Return on Tangible Assets (ROTA) of 1.04% is indicative of efficient asset deployment within a sector that, while capital-light in terms of fixed assets, is asset-intensive due to client funds and trading positions.

Valuation Insights: A “Screaming Buy” Opportunity

Independent valuation analyses underscore the compelling investment opportunity presented by StoneX Group Inc. post-merger. Two distinct valuation methodologies were employed: the Buffett-Inspired approach and the McGrew Growth method. Both analyses utilized an 8% discount rate and a 2.5% perpetual growth rate, with enterprise value equated to equity value for financial services firms, given their unique balance sheet structures. A prudent 40% margin of safety was applied to account for inherent market risks.

The Buffett-Inspired approach, which utilizes a constant 3% growth on pro-forma distributable earnings (defined as net income attributable to StoneX), yielded an intrinsic value per share of $154.15. Applying the 40% margin of safety, the target price stands at $92.49.

The McGrew Growth method, which incorporates a dynamic declining growth rate from the historical 26.2% CAGR to a 6% terminal growth rate over a 10-year period (classifying StoneX as a growth stock), produced a significantly higher intrinsic value per share of $441.00. With the 40% margin of safety, the target price is $264.60.

Given the current closing price of $94.96, both valuation models unequivocally classify SNEX as a “Screaming Buy,” highlighting the substantial upside potential attributed to the merger’s accretive effects and StoneX’s robust financial outlook.

Qualitative Fortifications: A Moat of High Strength

Beyond the compelling quantitative metrics, the R.J. O’Brien merger profoundly amplifies StoneX’s durable competitive advantage, fortifying its “moat” to one of high strength. The enhanced intangible assets, particularly in specialized expertise in futures and clearing, coupled with stronger network effects derived from a combined global presence spanning over 180 countries, create significant barriers to entry for competitors.

StoneX now boasts formidable cost advantages driven by its increased scale and geographic dominance, particularly in niche markets such as agricultural commodities and energy. The integration of nearly 300 introducing brokers from RJO, alongside RJO’s 110-year legacy in the futures industry, further solidifies this position. Clients of the combined entity will benefit from seamlessly integrated over-the-counter (OTC) hedging solutions, expanded physical commodities services, and deeper fixed income liquidity, fostering greater client loyalty and increasing switching costs for those seeking alternative providers.

The inherent low capital requirements of StoneX’s business model persist, with minimal tangible asset reinvestment needed. As evidenced by the mere $64 million TTM in capital expenditures against vast revenues, the firm can allocate substantial free cash flow to shareholders or growth initiatives without heavy reliance on large-scale capital investments. The expanded client float of $13 billion is expected to generate significant interest income with minimal additional infrastructure needs, further supporting high asset turnover.

The industry in which StoneX operates is inherently resilient, characterized by consistent demand for risk management solutions amidst geopolitical volatility and supply chain disruptions. The merger significantly bolsters the firm’s resistance to technological shifts, as the combined platforms and expertise will drive innovation in advisory and execution services. While the financial services industry can exhibit cyclicality, the current environment points to an upturn, as evidenced by StoneX’s impressive revenue surge and the projected volume growth driven by the RJO integration.

Competitive dynamics have unequivocally shifted in StoneX’s favor, positioning it as a clear market leader in the concentrated derivatives space following the acquisition of a historically strong rival. Key remaining competitors include:

• CME Group: A dominant player in futures exchanges and technology, but with a less personalized brokerage focus.
• Intercontinental Exchange (ICE): Excels in clearing and data services, benefiting from significant scale advantages.
• LPL Financial: A leader in retail brokerage, but with limited presence and expertise in commodities.
• BGC Partners: A specialist in voice brokerage, but with weaker global diversification compared to the newly combined StoneX.

StoneX’s enhanced network, expanded product suite, and deepened risk management capabilities provide a distinct competitive advantage over these players, particularly in the historically underserved commodity niches where few competitors possess comparable expertise and infrastructure.

Leadership’s Vision and the “One Big Beautiful Bill” Tailwind

The management outlook, as conveyed during the acquisition announcement, is marked by profound optimism. Sean O’Connor, Executive Vice-Chairman of StoneX, articulated the strategic significance of the merger: “This is a transformational transaction for StoneX, establishing us as a leading global derivatives clearing firm and reinforcing our position as an integral part of the global market structure across asset classes. Combining R.J. O’Brien’s extensive client network and proven clearing capabilities with StoneX’s deep liquidity, innovative OTC hedging solutions, and leading risk management infrastructure, we are well-positioned to continue to deliver exceptional services, broader market access, and industry-leading trading solutions to our combined client base.”

Gerry Corcoran, Chairman and CEO of RJO, echoed this sentiment, emphasizing the synergistic cultures of the two organizations: “We’re extraordinarily excited about this partnership between two great companies that each bring over a century of history in the futures industry and complementary capabilities, products, services, and cultures. We both prioritize a profound commitment to our clients and a focus on prudent risk management in addition to all the products we offer today, our clients and training opportunities. At the same time, our organization will benefit from new efficiencies, premier technologies, and greater growth potential.”

Adding a significant tailwind to StoneX’s favorable outlook is the recent passage of the “One Big Beautiful Bill Act” (OBBBA), signed into law by President on July 4, 2025. This sweeping legislation introduces several pro-business tax provisions specifically designed to benefit financial services firms such as the newly formed StoneX entity.

A key provision is the restoration of 100% bonus depreciation, allowing for the immediate expensing of qualifying capital investments. For StoneX, this translates into substantial tax savings on crucial technology upgrades, trading platforms, and infrastructure enhancements essential for seamlessly integrating RJO’s extensive operations. This accelerated depreciation can significantly boost potential cash flow by deferring tax liabilities, thereby freeing up substantial capital for reinvestment in growth initiatives, strategic debt management, or even further opportunistic acquisitions. It is important to note that the benefits from these tax incentives have not yet been factored into our current valuation calculations, suggesting further upside potential.

Beyond bonus depreciation, the OBBBA also features the permanent extension of the qualified business income (QBI) deduction, enhanced Section 179 expensing limits, and more favorable EBITDA-based limits on interest deductions. These provisions collectively support operational efficiency, potentially reducing effective tax rates and further enhancing profitability, particularly as the combined entity realizes the anticipated synergies from the merger.

Furthermore, the OBBBA’s broader emphasis on domestic energy dominance and infrastructure investments aligns seamlessly with StoneX’s established strength in commodities trading. Increased domestic production and enhanced supply chain stability in energy and agricultural sectors, spurred by the bill, could lead to higher transaction volumes for StoneX. Coupled with provisions like immediate R&D expensing for innovative fintech developments, these elements are poised to amplify cash flow generation, providing StoneX with even greater financial flexibility to navigate evolving market dynamics and pursue future growth opportunities in a more tax-advantaged environment.

In conclusion, the strategic synergies and exceptional fit of the R.J. O’Brien merger, combined with StoneX’s robust quantitative performance and the significant tailwinds from the OBBBA’s pro-business tax incentives, firmly underscore StoneX’s trajectory toward sustained leadership in the global financial services arena. The post-merger profile presents a compelling case for long-term value creation, making SNEX a particularly attractive investment in the current global landscape.

Additional Quantitative Results Table