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6 Reasons Why Virtus Investment (VRTS) Stock is a Must Buy

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It seems to be a wise idea to add Virtus Investment Partners, Inc. (VRTS - Free Report) stock to your portfolio amid the coronavirus crisis, given the strength in fundamentals and solid prospects. Moreover, the company’s steady capital-deployment activities reflect a strong balance-sheet position.

Further, analysts are bullish on the stock. Over the past 60 days, the Zacks Consensus Estimate for earnings moved 7.2% and 30.7% upward for 2020 and 2021, respectively. Also, the company currently sports a Zacks Rank #1 (Strong Buy).

Shares of Virtus Investment have gained 25.7% in the past 12 months compared with the industry's 0.6% increase.

Factors That Make Virtus Investment a Solid Pick

Earnings Growth: Over the past three to five years, Virtus Investment has recorded earnings growth of 24.2% compared with the industry’s average of 8.1%. This momentum is likely to continue in the near term, reflected by the projected earnings growth rate of 4.2% for 2020 (against the projection of a 1.9% decline for the industry) and 35.8% for 2021.

Moreover, the company has an impressive earnings surprise history. Its earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 6.9%.

Revenue Strength: Virtus Investment’s total revenues have witnessed a CAGR of 15% over the last three years (2017-2019). This uptick primarily resulted from the steady rise in income from total investment management fees. Though the company’s sales are projected to decline 6% in 2020 (against the projection of no growth for the industry), it is expected to be up 30.6% for 2021.

Solid Balance-Sheet Position: As of Jun 30, 2020, Virtus Investment had total debt worth $234.8 million, lower than the cash & cash equivalents balance of $252.1 million. Moreover, the company’s current total debt to total capital of 26% improved sequentially and is below the industry average of 39.9%. This highlights that the company carries a relatively lesser credit risk and chances of its default in debt payments are likely to be lower even if the economic situation worsens.

Robust Capital Deployment: Virtus Investment’s capital-deployment activities are impressive.Since 2018, the company has been increasing its dividend annually, with the latest one announced in August. Considering yesterday’s closing price of $136.05 per share, the company's dividend yield currently stands at 2.41%. Aided by a robust liquidity position, its capital deployments look sustainable and thus, the company is expected to continue enhancing shareholder value.

Stock Looks Undervalued: Virtus Investment currently looks undervalued, with respect to the price/earnings (P/E) (F1) and price/sales (P/S) ratios. It has a P/E (F1) ratio of 8.49, which is below the industry average of 10.33. Also, the bank’s P/S ratio of 1.76 is lower than the industry average of 1.93.

Superior ROE: Virtus Investment’s trailing 12-month return on equity (ROE) highlights its growth potential. The company’s ROE of 20.04% compares favorably with the industry’s 11.91%, reflecting that it is more efficient in using shareholder funds than its peers.

Other Stocks to Consider

Credit Acceptance Corporation’s (CACC - Free Report) Zacks Consensus Estimate for 2020 earnings moved 23.2% upward to $10.48 in the past 60 days. The stock currently holds a Zacks Rank of 2 (Buy).  You can see the complete list of today’s Zacks #1 Rank stocks here.

BrightSphere Investment Group Inc.’s (BSIG - Free Report) Zacks Consensus Estimate for the current-year earnings moved 4.5% north to $1.62 per share in the past two months. The stock currently carries a Zacks Rank of 2.

Eaton Vance Corp.’s (EV - Free Report) Zacks Consensus Estimate for earnings moved up 6.4% to $3.33 in 60 days for 2020. The stock currently carries a Zacks Rank of 2.

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