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Robust AUM Supports Artisan Partners (APAM), High Costs Ail
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Artisan Partners Asset Management Inc.’s (APAM - Free Report) robust assets under management (AUM) keep driving its revenue growth. Decent liquidity aids the firm to meet its debt obligations even in case of economic slowdown. However, rising operating expenses on investments in technology pose a major concern. Also, volatile client cash flows and unsustainable capital-distributions are near-term headwinds.
Artisan Partners’ total AUM has been witnessing improvement over the years. This has been supported by the company’s efforts to improve and add investment strategies. Going forward, improvement in global equity and debt markets will increase AUM, aiding top-line growth. Our estimate for the metric suggests a three-year compound annual growth rate (CAGR) of 7.6% by 2025.
APAM’s solid AUM balance drives its revenue growth. Also, its diverse product offerings and investment strategies continue to attract investors. Moreover, focusing on long-term growth, it continues to invest in new teams, technological and operational capabilities. Such efforts are likely to boost revenues in the upcoming period. Our estimate for total revenues suggests a three-year CAGR of 2.8% by 2025.
Artisan Partners has a decent balance sheet reflected by lower borrowings compared to the cash and cash equivalents along with unutilized revolving credit facility as of Sep 30, 2023. A strong cash generation ability and modest leverage provides the company with a decent liquidity position. Hence, Artisan Partners has a lesser likelihood of defaulting on interest and debt repayments even if the economic situation worsens.
However, APAM’s operating expenses have witnessed growth over the years. Going forward, any rise in technology costs, fixed compensation costs as well as hiring of additional associates are likely to hinder bottom-line growth. We estimate total operating expenses to record a CAGR of 5.9% over the next three years.
Artisan Partners has been witnessing a volatile trend in net client cash flows over the past several years. Also, uncertainty in global financial markets due to elevated inflation, high interest rates and geopolitical concerns might disrupt traditional asset allocations and keep investors on the sidelines.
The company’s capital distribution activities are a concern. Its debt to equity ratio and payout ratio compare unfavorably with the industry’s average. Thus, we believe that capital distributions are not likely to be sustainable in the future.
Over the past six months, shares of APAM have gained 16.7% compared with the industry’s growth of 17.3%.
The consensus estimate for PSEC’s 2023 earnings has moved 8.1% north over the past 30 days. The company’s share price has decreased 8.9% over the past six months.
The Zacks Consensus Estimate for CSWC’s fiscal 2023 earnings has been revised 2.7% upward over the past 30 days. The stock has gained 21.9% over the past six months.
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Robust AUM Supports Artisan Partners (APAM), High Costs Ail
Artisan Partners Asset Management Inc.’s (APAM - Free Report) robust assets under management (AUM) keep driving its revenue growth. Decent liquidity aids the firm to meet its debt obligations even in case of economic slowdown. However, rising operating expenses on investments in technology pose a major concern. Also, volatile client cash flows and unsustainable capital-distributions are near-term headwinds.
Artisan Partners’ total AUM has been witnessing improvement over the years. This has been supported by the company’s efforts to improve and add investment strategies. Going forward, improvement in global equity and debt markets will increase AUM, aiding top-line growth. Our estimate for the metric suggests a three-year compound annual growth rate (CAGR) of 7.6% by 2025.
APAM’s solid AUM balance drives its revenue growth. Also, its diverse product offerings and investment strategies continue to attract investors. Moreover, focusing on long-term growth, it continues to invest in new teams, technological and operational capabilities. Such efforts are likely to boost revenues in the upcoming period. Our estimate for total revenues suggests a three-year CAGR of 2.8% by 2025.
Artisan Partners has a decent balance sheet reflected by lower borrowings compared to the cash and cash equivalents along with unutilized revolving credit facility as of Sep 30, 2023. A strong cash generation ability and modest leverage provides the company with a decent liquidity position. Hence, Artisan Partners has a lesser likelihood of defaulting on interest and debt repayments even if the economic situation worsens.
However, APAM’s operating expenses have witnessed growth over the years. Going forward, any rise in technology costs, fixed compensation costs as well as hiring of additional associates are likely to hinder bottom-line growth. We estimate total operating expenses to record a CAGR of 5.9% over the next three years.
Artisan Partners has been witnessing a volatile trend in net client cash flows over the past several years. Also, uncertainty in global financial markets due to elevated inflation, high interest rates and geopolitical concerns might disrupt traditional asset allocations and keep investors on the sidelines.
The company’s capital distribution activities are a concern. Its debt to equity ratio and payout ratio compare unfavorably with the industry’s average. Thus, we believe that capital distributions are not likely to be sustainable in the future.
Over the past six months, shares of APAM have gained 16.7% compared with the industry’s growth of 17.3%.
Image Source: Zacks Investment Research
Currently, APAM carries a Zacks Rank #3 (Hold).
Finance Stocks Worth Considering
A couple of better-ranked stocks from the finance space are Prospect Capital Corporation (PSEC - Free Report) and Capital Southwest Corporation (CSWC - Free Report) . PSEC currently sports a Zacks Rank #1 (Strong Buy) whereas CSWC carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for PSEC’s 2023 earnings has moved 8.1% north over the past 30 days. The company’s share price has decreased 8.9% over the past six months.
The Zacks Consensus Estimate for CSWC’s fiscal 2023 earnings has been revised 2.7% upward over the past 30 days. The stock has gained 21.9% over the past six months.