Shares of Envestnet, Inc. (ENV - Free Report) have gained 36.2% over the past year, outperforming the 31.5% rally of its industry and 20.8% growth of the Zacks S&P 500 composite.
With expected long-term earnings per share (EPS) growth rate of 17.5% and a market cap of $3.8 billion, it is a stock that investors should retain in their portfolios.
Factors That Bode Well
A number of trends are creating significant market opportunity for Envestnet’s technology-enabled solutions and services.
Investment advice is becoming an important part of financial planning and customers are increasingly seeking personalized wealth management services. Technology adoption is likely to increase significantly with increasing need to interact with clients who prefer guided advice in a cost-effective manner. Further, a massive wealth transfer is expected to happen in the coming years as baby boomers transfer assets to their offspring, who tend to prefer greater use of technology in their involvements with advisors.
Envestnet’s business model ensures solid asset-based and subscription-based recurring revenue generation capacity. Recurring revenues in the third quarter of 2019 came in at $227.2 million, up 16.3% year over year and constituting 96% of total revenues.
Envestnet, Inc Revenue (TTM)
The company has invested in technology development with a view to improve operational efficiency, increase market competitiveness, address regulatory demands and cater to client-driven requests for new capabilities. Its technology design allows for significant scalability.
Envestnet never declared and currently does not have any plan to pay out cash dividends on common stock. So, investors seeking cash dividends should avoid buying Envestnet’s shares.
Further, with goodwill constituting more than 50% of its total assets, Envestnet’s capital structure puts investors at risk. This is because such a large percentage of assets won’t actually fetch any cash if there is any problem with the company.
Zacks Rank & Stocks to Consider
Envestnet currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the broader Zacks Business Services sector are Global Payments (GPN - Free Report) , Fiserv (FISV - Free Report) and Cardtronics (CATM - Free Report) . While Global Payments and Cardtronics sport a Zacks Rank #1 (Strong Buy), Fiserv carries a Zacks Rank #2 (Buy).
Long-term expected EPS (three to five years) growth rate for Global Payments, Fiserv and Cardtronics is 18.1%, 13.8% and 4%, respectively. You can see the complete list of today’s Zacks #1 Rank stocks here.
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