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With prudent cost management and strong inorganic growth strategies, Legg Mason LM appears a solid bet now. Further, the company's focus on expanding product offerings for its customers bode well for the long term.
Moreover, positive growth prospects and strong fundamentals make this Zacks Rank #1 (Strong Buy) stock a wise investment option.
Over the last 60 days, the Zacks Consensus Estimate for fiscal 2018 and fiscal 2019 increased 18.1% and 6.2%, respectively.
Shares of Legg Mason have gained 11.8% in the past six months, undrperforming 24% growth recorded by the industry.
What Makes Legg Mason a Must Buy
Prudent Expense Management: Legg Mason recorded 5.6% decline in operating expenses in fiscal 2017 on the back of its efficient cost control measures.Though expenses increased in first three quarters of fiscal 2018, it might remain flat or decline slightly for full-year fiscal 2018, considering the impact of previous cost-cutting initiatives.
Strategic Acquisitions: Legg Mason has expanded primarily via acquisitions, with majority of its assets under management (AUM) growth driven by the same. In 2016, it acquired majority stake in Financial Guard LLC and Clarion Partners, in line with its long-term strategy to provide investors with diversified product offerings. All these initiatives are anticipated to support the company’s AUM growth.
Revenue Strength: The company’s operating revenues witnessed a three-year CAGR of 1.2% (ended fiscal 2017). Also, the top line is anticipated to grow nearly 7.9% in fiscal 2018, higher than the industry average of 4.7%. This indicates its superiority in generating revenues.
Stock is Undervalued: Legg Mason has a P/E ratio and P/B ratio of 11.47 and 1.00 compared with the industry’s average of 11.54 and 1.87, respectively. Also, the stock has a Value Score of A. Based on these ratios, the stock seems undervalued.
Other Stocks to Consider
Waddell & Reed Financial WDR has witnessed 11.6% upward estimate revisions for the last 60 days. In a year’s time, the company’s share price has gained more than 7%. It sports a Zacks Rank of 1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Ameriprise Financial Services AMP carries a Zacks Rank #2 (Buy). Its earnings estimates for 2018 have been revised 5.6% upward over the last 60 days. Also, its shares have gained 18.9% in the past year.
Virtus Investment Partners VRTS carries a Zacks Rank of 2. The Zacks Consensus Estimate for the company has jumped 4.1% for the current year, in the last 60 days. Its share price has gained 20% in the past year.
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