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Solid Asset Balance Aids SEI Investments Despite High Costs

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SEI Investments Co.’s (SEIC - Free Report) strong global presence, solid assets under management (AUM) balance, and diversified products and services will continue to aid growth. Moreover, rising demand for the SEI Wealth Platform (“SWP”) across several financial institutions will likely support the company’s profits.

However, continuously increasing expenses are expected to curb bottom-line growth to an extent in the near term.

The Zacks Consensus Estimate for the company’s current-year earnings has also declined 6.1% over the past 30 days. Thus, the company currently carries a Zacks Rank #3 (Hold).

Due to the current economic crisis, owing to the coronavirus outbreak along with other fundamental concerns, the company’s shares have lost 22.3% so far this year compared with the industry’s decline of 13.7%.






Looking at fundamentals, SEI Investments’ revenues witnessed a CAGR of 5.4% over the last six years (2014-2019), with the uptrend continuing in first-quarter 2020. While total AUM declined in the first quarter, the same registered a rising trend over the last four years (2016-2019), witnessing a CAGR of 7.5% amid a tough asset gathering backdrop in the second half of 2018.

Notably, revenues generated from TRUST 3000 and SWP — through which the company’s primary business platform, Investment Processing, delivers its outsourced software and processing services — are recognized under information processing and software servicing fees. While the same recorded a year-over-year decline in 2019 and the first quarter of 2020, it witnessed a CAGR of 1.7% over the last four years (ended 2019).

Further, the company currently has sufficient cash balance to make payment of interest and repayment of debt in the near term, even if the economic situation worsens further.

However, expenses have witnessed a CAGR of 5.4% over the last six years (2014-2019) mainly due to an increase in compensation costs, and data processing and computer-related expenses. As the company’s operations are mainly technology driven, costs related to the same are expected to continue rising.

Moreover, SEI Investments’ increasing dependence on fee-based revenues remains a concern. Asset management, administration and distribution fees comprised 80% of total revenues in first-quarter 2020, up from 75% in 2014. Fluctuations in markets, and foreign exchange translations and/or regulatory changes may hamper the company’s AUM growth.

A few stocks from the finance space worth a look are mentioned below.

Tradeweb Markets Inc. (TW - Free Report) has witnessed an upward earnings estimate revision of 7.6% for 2020 over the past 60 days. This Zacks Rank #1 (Strong Buy) stock has gained 36.1% over the past six months.

GAIN Capital Holdings, Inc.’s current-year earnings estimates increased significantly in 60 days’ time. Further, the company’s shares have appreciated 53.4% over the past six months. At present, it sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Mackinac Financial Corporation has witnessed an upward earnings estimate revision of 25% for the ongoing year in the past 60 days. This Zacks #2 Ranked (Buy) stock has depreciated 41.6% over the past six months.

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