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Why Staying on the Sidelines Is Right for Invesco Stock

IVZ LAZ VRTS PFG

Trades from $3

On Nov 21, 2016, we issued an updated research report on Invesco Ltd. (IVZ - Free Report) .  The company remains well positioned for future growth given its diversified footprint and product offerings. However, elevated expenses, increased debt level and impact of heightened regulations remain concerns for the company.

Invesco’s revenue growth looks encouraging. In the past five years (2011–2015), net revenues grew at a CAGR of 6.9%. Moreover, its diversified product offerings and alternative investment strategies are expected to continue attracting investors, which in turn, will further support top-line growth in the quarters ahead.

Also, the company’s total assets under management (AUM) have shown persistent improvement. Moreover, the volatility in the equity markets is expected to further support AUM growth. Notably, outside the U.S, its client AUM consisted of 34% of total AUM as of Sep 30, 2016.

Invesco’s capital deployment activities remain on track. The company has been increasing its dividends since 2009. Also, it has an effective share repurchase program in place.

However, Invesco’s expenses have been increasing, which in the last four years (2012–2015) rose at a CAGR of 5.5%. Also, despite management undertaking initiatives to transform key business support functions for boosting efficiency, their impact is not expected to be realized any time soon as the company continues to invest in franchise.

Also, the company has a high debt level which might restrict it from procuring additional finance for working capital, capital expenditures, acquisitions, debt service requirements or other purposes. Notably, Invesco’s long-term debt was $2.1 billion (8.7% of total assets) as on Sep 30, 2016.

Further, the company faces the risk of various regulatory restrictions both in the domestic as well as international markets.

Notably, over the past 30 days, the Zacks Consensus Estimate has been revised downward by nearly 1.7% to $2.25 per share for 2016.

Nevertheless, shares of Invesco have gained approximately 5% in the past three months.

INVESCO LTD Price
 

Currently, Invesco carries a Zacks Rank #3 (Hold).

Other Stocks to Consider

Some better-ranked stocks in the same space include Virtus Investment Partners, Inc. (VRTS - Free Report) , Lazard Ltd. (LAZ - Free Report) and Principal Financial Group Inc. (PFG - Free Report) .

Virtus Partners has witnessed an upward earnings estimate revision of 6.7% for the current year over the past 30 days. Its share price has risen 44.2% in the past six months. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Lazard currently carries a Zacks Rank #2 (Buy). For the current year over the past 30 days, its Zacks Consensus Estimate has been revised 4.3% upward. Its share price has increased 19.7% in the past six months.

Principal Financial also carries a Zacks Rank #2. It has witnessed an upward earnings estimate revision of 1.1% for the current year over the past 30 days, while its share price is up 34% in the past six months.

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