Shares of Invesco Ltd. (IVZ - Free Report) have declined 14.6% over the past year against the industry’s rally of 10.3%. During the same period, the S&P 500 has rallied 14.4%. Moreover, analysts do not seem to be too optimistic regarding the company’s earnings growth potential.
Its Zacks Consensus Estimate for current-quarter earnings has been unchanged over the past 30 days. The stock currently carries a Zacks Rank #3 (Hold).
Moreover, the company has an unimpressive Growth Score of D. Our research shows that stocks with a Growth Score of A or B when combined with a Zacks Rank #1 (Strong Buy) or 2 (Buy) offer the best upside potential. Hence, the stock does not look promising at present.
One-year Price Performance
So what’s the reason for investors' apathy toward this stock?
Elevated expense levels remain a major concern for Invesco. Over the last three years, its expenses have been rising mainly because of higher compensation and marketing expenses. While the company exceeded its cost synergy target in relation to the OppenheimerFunds acquisition, overall expenses are expected to continue increasing due to inorganic growth efforts and investment in franchise.
Additionally, Invesco’s high debt burden remains a headwind. As of Sep 30, 2019, the company’s long-term debt amounted to $2.3 billion (nearly 6.1% of total assets). Also, it has a debt-to-equity ratio of 0.78 compared with the industry average of 0.29. High debt obligation might drag the company to a relatively disadvantageous position.
Invesco’s return on equity (ROE) also undercuts its growth potential. It has a trailing 12-month ROE of 10.60% at present, which compares unfavorably with ROE of 12.28% for the industry and 17.16% for the S&P 500. This reflects that the company is less efficient in using shareholders’ funds.
Picking Favorable Asset Management Stocks
While Invesco doesn’t appear to be an attractive pick right now, there are a few asset managers that are good investment options. Before we check out the stocks worth a look, let’s see how the industry is performing.
The investment management industry is expected to benefit from continued growth in assets under management (AUM) balance, driven by steady rise in active equity flows. Since the majority of asset managers’ revenues come from performance fees and investment advisory fees, this is expected to support top-line growth.
Also, asset managers are investing in upgrading technology to better align with client needs. This is expected to further support bottom-line growth in the quarters ahead.
Hence, it might be a wise idea to add these stocks to your portfolio now.
With the help of the Zacks Stock Screener, we have zeroed in on three investment management stocks with a better Zacks Rank. Also, these companies have surpassed the industry’s rally over the past year.
Cohen & Steers, Inc. (CNS - Free Report) has a market cap of $3.09 billion. Over the past 12 months, the company’s shares have surged 84.3%. Further, its earnings growth is projected at 4.6% and 13.9% for 2019 and 2020, respectively. The stock currently sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Virtus Investment Partners, Inc. (VRTS - Free Report) also carries a Zacks Rank #1 at present. The company has a market cap of $803.2 million. Its earnings for 2019 and 2020 are expected to increase 17.2% and 4.9%. Further, shares of the company have gained 26.9% over the past 12 months.
Carrying a Zacks Rank #2 at present, Federated Investors, Inc. has a market cap of $3.36 billion. Its 2019 and 2020 earnings are projected to rise 18.4% and 9.4%, respectively. Further, over the past year, its shares have rallied 28.7%.
One-Year Price Performance
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