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Envestnet Stock Soars to an All-Time High: What's Driving It?

Zacks Equity Research

Shares of Envestnet, Inc. ENV hit an all-time high of $75.65 on Jan 14, before closing a tad lower at $74.26.

Envestnet’s shares have charted a solid trajectory over the past year, appreciating around 41%. The company has witnessed a 17.5% jump in share price over the past two months, following its encouraging third-quarter 2019 results.

Currently, Envestnet holds a Zacks Rank #2 (Buy) and has a market cap of $3.9 billion.

Let’s find out what’s supporting the rally.

Encouraging Forecasts

The Zacks Consensus Estimate for 2019 indicates EPS increase of 11.5%, much higher than the industry’s expected EPS growth of 9.3%. For 2020, EPS growth is estimated to be 18.7%, higher than the industry’s expected growth of 16.1%.

The company raised earnings and revenue guidance for 2019. Adjusted EPS is expected to be $2.14 compared with the prior guidance of $2.10 to $2.12. The revised guidance indicates year-over-year EPS growth of 11.5%.

Envestnet expects full-year revenues between $896.5 million and $898 million, compared with the previous expectation of $888.5-$894.5 million. The midpoint of the revised guided range indicates year-over-year revenue growth of 10.4%.

For the fourth quarter of 2019, Envestnet expects revenues between $236.5 million and $238 million, the midpoint of which indicates year-over-year growth of 12.9%. Adjusted EPS is anticipated to be 68 cents, suggesting 11.5% year-over-year growth.

Strong Fundamentals

Envestnet’s business model ensures solid asset-based and subscription-based recurring revenue generation capacity. With recurring revenues constituting more than 95% of total revenues, the company usually witnesses solid top-line performance.

Envestnet’s recurring revenues in 2018 totaled $776.7 million, up 18.4% year over year. In the last reported quarter, recurring revenues of $227.2 million increased 16.4% year over year.

Bright Future

A number of trends are creating significant market opportunity for Envestnet’s technology-enabled solutions and services. Investment advice is becoming an important part of financial planning and customers are increasingly seeking personalized wealth management services. Technology adoption is likely to increase significantly with increasing need to interact with clients, who prefer guided advice in a cost-effective manner.

The recent credit bureau-exclusive partnership with Equifax to provide clients access to real-time, permission-based online banking data on loan applicants, is part of Envestnet’s efforts to pursue opportunities in credit decisions.

Other Stocks to Consider

Some other top-ranked stocks in the broader Zacks Business Services sector are S&P Global SPGI, Accenture ACN and Booz Allen Hamilton BAH, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The long-term expected EPS (three to five years) growth rate for S&P Global, Accenture and Booz Allen Hamilton is 10%, 10.3% and 13%, respectively.

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