EHC vs. CHE: Which Stock Should Value Investors Buy Now?
It seems to be a wise idea to add Waddell & Reed Financial, Inc. WDR stock to your portfolio now, given its underlying strength and solid growth prospects. It has been making various efforts to improve efficiency and optimize its operations.
Moreover, its investment in the Retail Broker-Dealer channel, by providing additional support to its advisors through training opportunities and enhanced technology tools, is expected to boost revenues and assets under management (AUM) in future.
Also, the company’s Zacks Consensus Estimate for the current-year earnings has been revised 6.2% upward over the last 30 days, reflecting analysts’ optimism regarding its earnings growth potential. Thus, the stock currently sports a Zacks Rank #1 (Strong Buy).
While shares of the company have gained 22% in the past year, slightly underperforming the industry’s rally of 25.4%, the positive estimate revisions and solid Zacks Rank indicate that the stock has upside potential left.
Key Driving Factors
Earnings per Share (EPS) Strength: Even though Waddell & Reed’s earnings have declined in the last three to five years, the trend is expected to reverse in the near term. Its earnings are expected to grow 16.4% in 2018, higher than the industry average of 10.7%.
Also, the company has an impressive earnings surprise history. Its earnings have surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with an average beat of 4.4%.
Declining Expenses: Waddell & Reed’s expenses have fallen at a CAGR of 6.3% over the last four years (2014-2017). Moreover, given its efforts to improve efficiency and optimize operations, costs are likely to remain low in the next few quarters, thereby supporting bottom-line growth.
Superior Return on Equity (ROE): Waddell & Reed’s trailing 12-month ROE reflects its superiority in terms of utilizing shareholder funds compared with the peers. The company has an ROE of 16.63%, higher than the industry average of 12.61%.
Stock Seems Undervalued: With respect to the price/cash flow and price/earnings ratios, Waddell & Reed seems undervalued. It has a P/CF ratio of 8.9 and a P/E (F1) ratio of 8.9, both falling below the respective industry averages of 10.1 and 11.4. Also, the stock has a Value Score of A. The Value Style 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
Some other top-ranked stocks in the same space include Legg Mason, Inc. LM, Ameriprise Financial, Inc. AMP and Virtus Investment Partners, Inc. VRTS.
In the past 60 days, Legg Mason witnessed 18.1% upward revision in its Zacks Consensus Estimate for the current fiscal year earnings. Its shares have rallied 18.6% over the last year. The stock currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
In the past 60 days, Ameriprise’s earnings estimates for the current year have been revised upward by nearly 1%. Over the last year, its shares have gained 25.6%. It currently has a Zacks Rank #2 (Buy).
Virtus Investment also has a Zacks Rank of 2. In the past 60 days, it has witnessed an upward earnings estimate revision of 4.1% for the current year. Also, its shares have increased 28.7% over the last year.
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Waddell & Reed Financial, Inc. (WDR) : Free Stock Analysis Report
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