Invesco (IVZ - Free Report) is well poised for growth on the back of solid assets under management (AUM), increased global presence and inorganic growth efforts. However, high level of debt and elevated expenses remain key concerns.
Driven by a solid AUM balance, the company’s net revenues have been witnessing growth for the past few years. Further, its diverse product offerings and solid retail channel, along with a robust institutional pipeline, will keep attracting investors’ offerings, which will likely stoke growth. Notably, net revenues witnessed a five-year (2014-2018) CAGR of 1.4%.
Invesco’s capital-deployment activities are likely to further enhance shareholder value, aided by the company’s robust liquidity position. Apart from increasing its dividend annually since 2009, the company has its share-buyback program in place.
Additionally, the company is expanding its operations in international markets through acquisitions and broad product diversification. This will likely strengthen its asset-management business. Outside the United States, Invesco has a solid presence in Europe, Canada and the Asia-Pacific, which constituted nearly 27.9% of the company’s client AUM as of Jun 30, 2019.
However, operating expenses of the company have witnessed a three-year CAGR of 7.5% (2016-2018). Thus, rising costs related to compensation, marketing and acquisitions are headwinds for the company’s financials.
Also, high level of debt will restrict the company from procuring additional finance. Notably, as of Jun 30, 2019, Invesco’s long-term debt amounted to $2.1 billion (nearly 5.5% of total assets). Furthermore, any unfavorable economic and industry conditions could amplify the negative impact of high-debt obligation.
Additionally, increased presence of goodwill and intangible assets in the company’s balance sheet might dampen its financials.
Shares of this Zacks Rank #3 (Hold) company have rallied 1.3% so far this year, outperforming the industry’s decline of 1.2%
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