It seems to be a wise idea to add Ameriprise Financial, Inc. (AMP - Free Report) stock to your portfolio now amid the coronavirus pandemic, given the strength in its fundamentals and solid prospects. Moreover, its steady capital-deployment activities reflect a strong balance-sheet position.
Further, analysts are bullish on the stock. Over the past 30 days, the Zacks Consensus Estimate for earnings has moved 5.9% upward for 2020. The company currently carries a Zacks Rank #2 (Buy).
Shares of have Ameriprise lost 8.5% in the past 12 months compared with the industry's 13.8% fall.
Factors That Make Ameriprise a Solid Pick
Earnings Growth: Over the past three to five years, Ameriprise has recorded earnings growth of 17% compared with the industry’s average of 7%. This momentum is likely to continue in the near term, reflected by the projected earnings growth rate of 3.2% for 2020 (against the projection of a 14.1% decline for the industry) and 6.8% for 2021.
Moreover, the company’s earnings surpassed the Zacks Consensus Estimate in three and missed in one of the trailing four quarters with an average surprise of 11.7%.
Also, the company has a Growth Score of A. Our research shows that stocks with the combination of a Style Score of A or B, and a Zacks Rank #1 (Strong Buy) or 2, offer the best upside potential.
Revenue Strength: Ameriprise’s well-diversified portfolio and dynamic service-offering capacity has resulted in steady revenue growth. The total net revenues witnessed a CAGR of 3.2% over the last four years (2016-2019). Although sales are expected to decline 8.4% in 2020, the same is expected to record growth of 2.5% in 2021.
Solid Balance-Sheet Position: As of Mar 31, 2020, Ameriprise had total debt worth $5.33 billion, higher than the cash & cash equivalents balance of $3.35 billion. However, the company's first-quarter 2020 times-interest-earned ratio of 6.4 compares favorably with the industry average and improved on a sequential basis. Moreover, the current total debt to total capital of 35.7% is below the industry average. These imply that the company carries relatively lesser credit risk and its earnings are likely to be sufficient to meet interest and/or debt obligations even if the economic situation worsens.
Steady Capital Deployment: Ameriprise’s capital-deployment activities remain impressive with regular dividend hikes. In May, the company announced a dividend hike for the 13th time since 2010. Further, in February 2019, it announced an additional repurchase plan worth $2.5 billion (expiring in March 2021).Given a strong balance-sheet position, a dividend payout ratio lower than the industry and decent earnings growth, the company will be able to sustain capital-deployment plans.
Superior ROE: Ameriprise’s trailing 12-month return on equity (ROE) highlights its growth potential. The company’s ROE of 38.86% compares favorably with the industry’s 12.36%, underlining the fact that it is more efficient in using shareholder funds than peers.
Stock Looks Undervalued: Ameriprise looks undervalued, with respect to price/earnings (P/E) (F1) and price/sales (P/S) ratios. It has a P/E (F1) ratio of 7.95, which is below the industry average of 9.99. Also, its P/S ratio of 1.26 is lower than the industry average of 1.80.
Additionally, the stock currently has a Value Score of A. The Value Score condenses all valuation metrics into one actionable score that helps investors steer clear of “value traps” and identify stocks that are truly trading at a discount.
Other Stocks to Consider
Prospect Capital Corporation (PSEC - Free Report) witnessed an upward earnings estimate revision of 12.5% for 2020 over the past 30 days. Its shares have lost 28.7% over the past year. At present, it sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Waddell & Reed, Inc. (WDR - Free Report) has witnessed upward earnings estimate revisions of 9.9% for the current year over the past 30 days. However, this Zacks #2 Ranked stock has lost 21.7% over the past 12 months.
Eagle Bancorp Montana, Inc. (EBMT - Free Report) has witnessed 7.5% upward earnings estimate revision for the ongoing year in the past 30 days. This Zacks #2 Ranked stock has appreciated 2.4% over the past year.
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