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5 Reasons Why You Should Invest in T. Rowe Price Stock Right Now

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T. Rowe Price Group, Inc. (TROW - Free Report) appears to be a wise investment option, driven by its solid asset under management (AUM) balance, business diversification initiatives and solid leverage.

The Zacks Consensus Estimate for T. Rowe Price's 2024 and 2025 earnings has been revised upward over the past 30 days. This shows that analysts are optimistic regarding the company’s earnings growth prospects.

Estimate Revision Trend

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

TROW currently carries a Zacks Rank #2 (Buy).

What Makes TROW Stock Worth Betting On

Revenue Strength: Organic growth has been a key strength for T. Rowe Price, as reflected by its revenue growth story. Net revenues saw a four-year (ended 2023) CAGR of 3.6%, with the trend continuing in the first nine months of 2024.

Going forward, the company’s focus on fortifying its business by enhancing investment capabilities, broadening distribution reach and investing in new product offerings will support revenue growth. We project revenues to witness a three-year (ending 2026) CAGR of 6.6%.

AUM Growth: The company’s AUM balance has witnessed a CAGR of 4.6% over the past four years (2019-2023), with the rising trend continuing in the first nine months of 2024. A strong brand, a consistent investment track record and decent business volumes are expected to continue supporting AUM growth in the upcoming period. We project AUM to witness a three-year (ending 2026) CAGR of 10.9%.

Superior Return on Equity (ROE):  T. Rowe Price’s trailing 12-month ROE reflects its growth potential. The company’s ROE of 20.35% compares favorably with the industry’s 14.67%, highlighting its efficiency in using shareholders’ funds.

Encouraging Capital Distribution: The company has hiked quarterly dividends every year since its IPO in 1986, the most recent being a sequential hike of 1.6% in February 2024 to $1.24 per share. In 2020, the board of directors increased the common share repurchase authorization by 10 million shares, bringing the total authorization to 22.4 million. As of Sept. 30, 2024, approximately 4 million shares remained under authorization. 

Given its solid liquidity position and a favorable debt-to-equity position compared with the industry average, its capital distribution activities seem sustainable.

Strong Leverage: T. Rowe Price’s debt/equity ratio is 0.00 compared with the industry average of 0.09, displaying no debt burden relative to the industry. This highlights the financial stability of the company, even in an unstable economic environment.

TROW’s Price Performance

Over the past three months, shares of the company have gained 7.4% compared with the industry's upside of 16%.

Price Performance

 

Zacks Investment ResearchImage Source: Zacks Investment Research

 

Other Key Picks

A couple of other top-ranked stocks from the asset management space are Victory Capital Holdings, Inc. (VCTR - Free Report) and Janus Henderson Group plc (JHG - Free Report) .

The Zacks Consensus Estimate for VCTR’s current-year earnings has been unchanged over the past seven days. Its shares have gained 20.2% in the past three months. Currently, Victory Capital sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Janus Henderson Group flaunts a Zacks Rank #1 at present. Its earnings estimates for 2024 have been revised upward over the past seven days. In the past three months, JHG shares have rallied 14.5%.


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T. Rowe Price Group, Inc. (TROW) - free report >>

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