Despite the coronavirus outbreak-induced economic uncertainty, it seems to be a wise idea to add Affiliated Managers Group (AMG - Free Report) stock to your portfolio now. The company’s diverse product mix and initiatives to strengthen retail market operations are expected to aid growth. Moreover, its record of successful partnerships and global distribution capability make it a promising pick right now.
In fact, a positive trend in earnings estimate revisions reflects that analysts are optimistic regarding the company’s earnings growth prospects. The Zacks Consensus estimate for Affiliated Managers’ current-year earnings has moved 1% upward over the past 30 days. Thus, the company currently carries a Zacks Rank #2 (Buy).
Looking at its price performance, the stock has gained 26.6% over the past three months compared with the industry’s rally of 38.2%.
Mentioned below are some other factors that make Affiliated Managers an attractive investment option now.
Earnings Strength: The company witnessed earnings growth of 3.7% over the last three to five years. Also, it has an impressive earnings surprise history, having outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average beat being 4.5%.
While it is projected that earnings will decline 17.4% in 2020, the same is expected to rise 7% in 2021. Moreover, the company’s long-term (three-five years) projected earnings growth rate of 11.9% promises reward for investors.
Solid Inorganic Growth: Supported by a strong balance sheet and liquidity position, Affiliated Managers has considerable capability to invest in other companies and is expected to continue generating meaningful growth through new investments. In February 2020, it acquired a minority equity interest in Comvest Partners, while in July 2019 it acquired an equity interest in Garda Capital Partners. Despite the current economic crisis, owing to the pandemic, rising demand for equity and alternative strategies among institutional clients are expected to aid the company’s profitability, going forward.
Superior Return on Equity (ROE): Affiliated Managers’ ROE supports its growth potential. Its ROE of 19.43% compares favorably with the industry average of 12.55%, implying that it is more efficient in using shareholders’ funds when compared with peers.
Favorable Valuation: The company currently seems undervalued when compared with the broader industry with respect to its PEG and price/book (P/B) ratios. It has a PEG ratio of 0.52, below the industry average of 1.60. Also, its (P/B) ratio of 0.99 is lower than the industry average of 1.35.
Moreover, the stock has a Value Score of B. 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. Also, our research shows that stocks with a Value Score of A or B, when combined with a Zacks Rank #1 (Strong Buy) or #2, offer the best upside potential.
Other Stocks to Consider
Merchants Bancorp’s (MBIN - Free Report) current-year earnings estimates have moved 11.9% upward over the past 60 days. The stock has appreciated 21.3% over the past three months. The company currently carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
GAIN Capital Holdings’ (GCAP - Free Report) current-year earnings estimates have moved up significantly over the past 60 days. Further, the company’s shares have gained 25.7% over the past three months. At present, it has a Zacks Rank #2.
West Bancorporation’s WTBA current-year earnings estimates have moved up 13.9% over the past 60 days. The company’s shares have gained 19.2% over the past three months. At present, it sports a Zacks Rank of 1.
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