Waddell & Reed Financial, Inc.’s (WDR - Free Report) capital strength positions it well for growth opportunities in the future. Also, continuously declining expenses are expected to support its bottom-line growth.
However, the company continues to face pressure on its revenues. Also, a declining trend in assets under management (AUM) is a major concern.
The company’s Zacks Consensus Estimate for the current year earnings has also been revised 10.6% downward over the last 30 days. The stock currently carries just a Zacks Rank #3 (Hold).
Looking at the fundamentals, the company has seen its expenses declining at a CAGR of 5.1% over the last three years (2014-2016). Its efforts toward improving efficiency and optimizing operations should lead to further cost reduction.
Its initiatives through Project E should help in boosting top-line growth in the long run.
The company also has an efficient share repurchase and dividend payment policy in place. Supported by a solid capital position, it should be able to continue enhancing shareholder value through efficient capital deployment activities.
However, the company’s revenues have declined at a CAGR of 11.9% in the last three years (2014-2016). Also, because of a challenging business environment, its AUM has decreased at a CAGR of 14% in the last four years (2013–2016).
Further, the company has substantial intangibles on its balance sheet, which are subject to impairment. Hence, any heavy market turmoil could adversely impact its net inflows.
Waddell & Reed’s shares have lost 7.2% so far this year, compared with 16.5% growth for the industry it belongs to. Given the concerns, this price performance is not expected to improve in the near term.
Mentioned below are a few better-ranked stocks from the finance space, which are worth considering.
Zions Bancorporation (ZION - Free Report) has witnessed an upward earnings estimate revision of 8.9% for the current year over the past 30 days. Its share price has increased 50.1% in a year’s time. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ameriprise Financial, Inc. (AMP - Free Report) has witnessed an upward earnings estimate revision of nearly 4% for the current year over the past 30 days. Its shares have gained 43.4% in the past 12 months. It carries a Zacks Rank #2 (Buy).
TD Ameritrade Holding Corporation (AMTD - Free Report) also carries a Zacks Rank #2. The stock has witnessed an upward earnings estimate revision of nearly 1% for the current fiscal year over the past 30 days and rallied 36.6% in a year.
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